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I'm correcting excess contributions to a Roth IRA for TY 2019. I understand that the earnings will be taxed in TY 2019 as well, even though they are being returned to me in 2020. Where do I capture this in my tax return on the 1040? Is there a different and/or additional form I'll need as well?

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Good question.

Pub 590A for 2018 (2019 isn't out yet, but I doubt this changes) says to report for the year being corrected, but doesn't say how.

The 1040 instructions for line 1 say corrective distributions, including earnings, from an employer plan go on line 1, and the instructions for lines 4c&4d confirm this (normal distributions go on 4c&4d but corrective distributions go on 1). The line 1 instructions in the next sentence, apparently still about corrective distributions, say

... But don’t include distributions from an IRA* on line 1. Instead, report distributions from an IRA on lines 4a and 4b.

*This includes a Roth, SEP, or SIMPLE IRA

But the instructions for lines 4a&4b don't mention corrective distributions at all.

The instructions to the payee on the back of form 1099-R (for 2018, I don't download in-year forms until the final update; not the instructions for the payor) say that for a Roth IRA box 2a 'may' show 'taxable earnings on an excess contribution'. If they give you a revised 1099-R, which I think they are supposed to, and it has box 2a, I would just put that in 4a&4b. Otherwise you presumably know how much the underlying contributions were, and how much you received; I would put the difference on 4a&4b and hope for the best.

At least if I were doing my return by hand; I actually use commercial software, and it wouldn't surprise me if that has procedures built-in to handle this case -- I certainly have seen it handle special cases that I would expect to be less common. You could also go to a professional preparer; I wouldn't but that's just me.

UPDATE: while looking at another Q I found the definitive answer in the form 8606 instructions:

If, in 2019, you made traditional IRA contributions or Roth IRA contributions for 2019 and you had those contributions returned to you with any related earnings (or minus any loss) by the due date (including extensions) of your 2019 tax return, the returned contributions are treated as if they were never contributed. Don’t report the contribution or distribution on Form 8606 or take a deduction for the contribution. However, you must include the amount of the distribution of the returned contributions you made in 2019 and any related earnings on your 2019 Form 1040 or 1040-SR, line 4a; or Form 1040-NR, line 16a. Also include the related earnings on your 2019 Form 1040 or 1040-SR, line 4b; or Form 1040-NR, line 16b. Attach a statement explaining the distribution. Also, if you were under age 59½ at the time of a distribution with related earnings, you generally are subject to the additional 10% tax on early distributions (see Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts).

Good luck.

  • I'm actually using the downloadable H&R Block software; maybe i'll go though the interview process again and see if it asks. – Andy Feb 12 at 18:10
  • I finally figured out how to get the software to do the right thing. In the end, yes it was 4a & 4b, and also including form 5329 (8606 was not needed as this distribution of earnings is an exception to the reporting). – Andy Feb 24 at 1:06
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    Andy: right; it's in the 8606 instructions (and nowhere else AFAICS) that it says not to use 8606 for this, which seems like a self-contradiction to me. But que sera. – dave_thompson_085 2 days ago

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