excess 2023 Roth IRA contribution reported in 2023 but received 2024 1099R code 8J

[hgtc]

Client withdrew excess 2023 Roth contribution + earnings in 2024.  We had reported earnings in 2023 tax returns.  But, he received 2024 1099-R with code "8J" for the earnings (box 2a) that we already reported in 2023.

Lacerte reports this earnings as taxable incomes in 2024.  How can we correct this wrong box 4b in 2024 Form 1040?

If we report "0" in box 2a, how can we explain this adjustment in the program?

Thanks.

[TitoBonsai]

Your client properly reported the earnings in 2023 tax returns, in the year the excess contribution was made.

Moreover, Lacerte handles your 2024 data input correctly; it reports the investment earnings as taxable income in 2024 because you used code 8J.

The source of the problem is the 1099-issuer. It put the wrong code; it should have been P instead of 8J. Your client should ask for a corrected Form 1099-R.

[hgtc]

My client said that he contributed $6500 Roth on 1/2/2024 for tax year 2023.  Then, withdrew it + earnings on 3/4/2024 when recognized that he was not qualified for tax year 2023.

Charles Schwab said 8J is correct code.  Do we need to explain to IRS that earnings were reported in 2023 tax returns already?

Or, do we need to amend 2023 returns?

[TitoBonsai]

With the additional information you provided, I think CS's 2024 Form 1099-R is correct.

I would assume that the two months' earnings on $6,500 is a relatively insignificant amount. If that is the case, I would use Code P in Lacerte 2024 and move on. However, the correct approach is to amend 2023 returns and to use code 8J in Lacerte 2024.

[qbteachmt · Accepted solution]

So, there were no net earnings attributable to the excess in 2023, because the contribution for was Tax Year 2023, but the money was contributed and earned in 2024?

Roth IRA contributions aren't really reportable for the tax year, since it isn't deducted. It seems all your taxpayer has is 2024 activities that are reportable. The contribution is moot.

[hgtc]

So, taxable earnings to be reported in 2024.  Thanks.  

[hgtc]

Thanks.