Unhallowed ROTH IRA - TY 2022 & 2023

Forum|Forum|2 years ago
March 20, 2024
2 replies
17 views

Hello All! My TP was not allowed to contribute to a ROTH due to the filing status (MFJ). The funds were withdrawn in 2023 prior to the 2022 tax return filing date. A 1099-R was created by the brokerage firm to file with the 2022 return and I entered it with codes J & P to remove the penalty. TP received the actual 2023 1099-R for the which includes an additional 24.84; I'm sure is earned interest or dividends. Do I enter the 1099-R using the same codes and enter the taxable amount as the difference? Or only enter the taxable amount and ignore the balance since it was reported on the 2022 return? As always, appreciate your input and advice. Warm regards!

ProSeries Basic

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Best answer by Love2Cruise

Yes, you do not have to do anything with that 1099R for 2023. If you look at the codes, it is coded as taxable for 2022. The explanation of the codes should be on the back of the form if your client gave you the original.

Actually the brokerage firm didn't use the correct codes on the acutal 1099. They only used code J, as if it were a early distribution with no exceptions. 🙄 I asked the TP to contact them and request an amended one, otherwise the IRS will think she took another distribution. So now we're waiting to see how long that will take them. I'm not holding my breath since they tried talking her out of withdrawing the funds, AFTER I was on the phone with them and explained why she had to move the funds out. Scary isn't it? 😳

Thank you so much for your help and input. I am both appreciative and grateful.

Have a great evening!

F

Frustrated-in-IL

Level 8

Neither. The correct answer is to file an amended return for 2022.

However, for $24.84 of additional income I would do nothing and if a bill comes from IRS for a few dollars, advise the client to pay. I believe others here have indicated IRS won't even generate a notice for something that small.

L

Love2CruiseAuthor

Level 5

File an amended return to correct the reported income on 1099-R?

Thank you.

F

Frustrated-in-IL

Level 8

This is what I understand are the facts in your case.

You received a 2023 1099R coded that the transaction is taxable in 2022. This amount needs to go on the 2022 return which you already filed. The brokerage firm gave you a mock up form last year showing what the amount would be, and you included those amounts on the 2022 return. But those amounts were wrong. Now that you received the real form, it is different from what they projected by $24.84 of taxable income. The IRS only got the 2023 1099R that you just received and will see it is different from what you reported by $24.84.

In this case, for such a small amount I would just wait for IRS to respond instead of amending a return.