1099-R after over funding a ROTH, What do I need to do when I file?

Submitted by Greg Syr on Sat, 2020-02-22 19:37

Hi,

I received a distribution from a ROTH IRA that I did not re-characterize in time (I am over the Roth income limit).

I have received a refund of the 2018 Roth $$$. And I received the 1099-R.

I believe I owe a 5% or 6% penalty on my contribution amount.

What form do I file with my taxes to make things right on my refunded 2018 Roth IRA?

Thanks!

Permalink Submitted by Alan - IRA critic on Sat, 2020-02-22 21:18

Sounds like you missed the 10/15/2019 deadline to have the Roth excess recharacterized to TIRA. Therefore, you owe the 6% excise tax on a 2018 5329. Then you did a flat Roth distribution of the amount of the excess with no earnings calculation, reported on the 1099R with code J. You would report this on Form 8606, Part III. In most cases this distribution would be tax free since it came from your regular Roth IRA contributions balance, which you are responsible for tracking. That balance goes on line 22 of the 8606 and as long as it is more than the amount on the 1099R, the distribution is non taxable and you only have to complete lines 19,21,22 and 23 of the form. This all deals with the income tax, which should be 0.
Finally, you must complete a 2019 5329 to report removal of the 2018 excess. This form will now show your excess as 0 and you owe no excise tax for 2019. Note that this solution allowed any earnings on your excess contribution to remain in the Roth IRA.
If you think anything is different from my assumptions, please advise.