Tax withholding from a 1099-R excess distribution (code P)

[taxmo]

I have a client who made an excess contribution to a Roth IRA and so they withdrew it before the tax deadline and got a 1099-R with distribution code P.  My understanding is I need to report the earnings on the excess contribution in the tax year they made the contribution (the previous year).  And there's a special checkbox on the "Other Information" page in ProConnect ("2024 Form 1099-R with distribution code 'P' or 'R'").  

That's all fine, but they had box 4 tax withholding on the 1099-R for the distribution of the excess.  And my understanding is that tax withholding has to be reported on the next year tax return rather than the previous one.  And the way that's supposed to work is the tax software should allow the withholding to be reported, but not the taxable income when you enter that 1099-R with code P and this time don't check the "2025 Form 1099-R with distribution code 'P' or 'R'" checkbox. 

But ProConnect seems to also be ignoring the tax withholding when I don't check that box.  I think this may be a bug in the software, unless I'm not understanding something.  Is there any way I can force ProConnect to allow that to report that tax withholding on that next year tax return?  I can't just put in zeros as the distribution amount because it reports that as a critical error. 

[George4Tacks]

2025 1099R for excess contributions in 2024 that were withdrawn prior to filing the 2024 return in 2025?

From the 1099R P—Excess contributions plus earnings/excess deferrals (and/or
earnings) taxable in 2024 or a previous year

So the excess earnings were to have been reported in 2024.

The withholding would have affected the amount of distribution and therefore possibly the excess was not paid back to 2024. $10,000 distribution less $2,000 withholding would only have made $8,000 available for 2024 correction. This could still leave $2,000 excess contribution. Withholding is just like a distribution in 2025 to be credit to 2025 tax withheld.  IF the correction was for $12,500 less $2,500 then the full $10,000 excess contribution for 2024 would be satisfied and there would be a $2,500 distribution in $2,500 that may be subject to a partial amount being taxable and possibly an early withdrawal penalty.

No, there is no way to force ProConnect to move 2025 withholding to 2026.  

[taxmo]

Yes, I know that if it's a 2025 1099-R for excess contributions in 2024, I know the earnings on the excess contribution has to be reported as income for 2024.  

But my understanding is the tax withholding, however, is still supposed to be reported on the 2025 tax return because it was 2025 tax withholding with shows up on their 2025 IRS tax accounting transcripts.  ProConnect doesn't seem to be handling that part of it correctly, and I need to figure out some way to report that tax withholding alone on the 2025 return.  

[BobKamman]

Just go to the Tax Payments worksheet and enter it on one of the lines for "other withholding."

[taxmo]

The tax payments screen doesn't actually have something to enter other than withholding that I can find.  I could enter it as an additional estimated tax payment, but I have a feeling that would cause problems because it's not really the same thing as an estimated tax payment.  I did find on the "SS Benefits, Alimony, Misc. Income" page there is a "Tax Withheld" section where you can override tax withholding amounts, and that looks like probably a reasonable way to do it.  I may give that a try.

[dd11]

Did you find a solution?

I have the same issue with Lacerte. 2025 1099-R with code P and tax withholdings that don't flow through to the form.

I created another dummy 1099-R for same payer, to just report tax withholdings and left everything else blank. There was no diagnostic in Lacerte, but the efile got rejected.

Will try  entering in "Tax Withheld" section under Misc Income and resubmitting.

Did your efile go through?

[taxmo]

In ProConnect it gave me a critical error if I entered a 1099-R with just the withholdings without a distribution amount entered.  I filed it with the withholding reported on the "SS Benefits, Alimony, Misc. Income" page -> "Tax Withheld" section where you can override tax withholding amounts.  The e-file was accepted.

[IntuitKate]

Hi @dd11, Was this resolved for you? If you need further assistance, please contact Lacerte Support as they can remote in and take a closer look. 

[dd11]

Yes, it was resolved