Client took contribution to Roth IRA out before filing last year. This year got this 1099-R and it has taxable amount $1265. I see P is " Return of Principle taxable in 2020". Do we need to amend 2020?
I'm usually the one who tells the client they have an excess contribution so I'm always proactive in working with the client/custodian to figure out how much earnings have to be removed and include that amount prospectively on the current year return. Then when the 1099-R arrives next year I just match it up and stick it in the file.
I'm usually the one who tells the client they have an excess contribution so I'm always proactive in working with the client/custodian to figure out how much earnings have to be removed and include that amount prospectively on the current year return. Then when the 1099-R arrives next year I just match it up and stick it in the file.
hey Rick, I have this situation, they pulled the excess out, but the account actually lost money while it was in there...so nothing to report and nothing to deduct, right?
@Just-Lisa-Now- wrote: hey Rick, I have this situation, they pulled the excess out, but the account actually lost money while it was in there...so nothing to report and nothing to deduct, right?
Correct. IIRC there's some adjustment to basis that may need to be made (and may never be relevant). i.e. if your excess contribution was $6K and to correct it you took out $5K you have to remove $6K from the basis calculation. Check me on that though, I think it's in the 8606 instructions somewhere. I don't remember where but you'll need to tell PS this somewhere so it doesn't compute a penalty on the $1K that wasn't taken out because it was lost.
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