Roth Excess Contributions Reporting Earnings and Losses
I have excess Roth contributions ($7000 for me and $7000 for spouse) for 2020 and backed out the contributions. I received earnings with my original contribution, $7000 + $100 earnings. My spouse received original contribution minus the losses, $7000 – $200 net $6800. How do we properly report those? Simply on 1040 4a/4b with a clarification note? What would the net be? 4a) $7100 + $6800 and 4b) $0 or 4a) $7100 + $6800 and 4b) $100? or 4a) $100 and 4b) $100? or something else?
Permalink Submitted by Alan - IRA critic on Thu, 2022-03-31 20:42
You had to have completed the excess contributions returns by 10/15/2021, so should now each have a 1099R. What are the codes in Box 7? Those determine whether the 100 of gains are taxable in 2020 or 2021.
Permalink Submitted by Che Eng on Fri, 2022-04-01 17:48
Contributions returned already $7100 and $6800. No new 1099 until next year but everything I’ve read says to account for the gains in 2020 on 1040. Just not sure exactly what to enter.
Permalink Submitted by Alan - IRA critic on Fri, 2022-04-01 18:41
Seems to be a timing issue. If your excess contributions were for 2020, they had to be returned no later than 10/15/2021, in which case you would have the 1099R by now. If you will not receive the 1099R until next year, that means you received the returned contributions this year, too late to avoid an excise tax for 2020. Are you sure these contributions were for the 2020 year?
Permalink Submitted by Che Eng on Fri, 2022-04-01 21:00
These are all for 2021. I received the excess last month.
Permalink Submitted by Alan - IRA critic on Sat, 2022-04-02 00:17
OK. If you made these 2021 contributions in 2021, any earnings you received back will be taxable on your 2021 return. You cannot net your spouse’s loss against your gain, therefore you will have to report a taxable gain of 100 on your joint return, and it may be subject to the 10% penalty. However, if these contributions for 2021 were made in 2022, the gain will be taxable on your 2022 return instead.
If taxable on 2021 return, with some tax programs you will need to create a dummy 1099R to enter the gain, and you should both make explanatory statements with your return regarding the excess contributions and their return.