1099R confusion: messed up fixing my 2022 Roth IRA overcontribution in 2023

This is actually a fairly common mistake, so don't worry too much. When you overcontribute to a Roth IRA, there are specific procedures to correct it, and unfortunately taking a regular distribution isn't the ideal approach - which you discovered. Based on what you're describing, it sounds like Vanguard helped you process what's called a "return of excess contributions." This is different from a normal distribution because it specifically addresses the overcontribution issue. The 1099-R you received is showing the distribution you took, which includes the excess contribution amount and any earnings associated with it. The key things to look for on your 1099-R are the distribution code in Box 7 and whether there are any entries in Box 7a (taxable amount) or Box 2b. These will help determine how to report this on your taxes. Most likely, the earnings portion (if any) will be taxable for 2023, and if you were under 59½, there might be a 10% early withdrawal penalty on those earnings.

I had a similar situation last year with my Roth IRA overcontribution. After going in circles with my investment company, I finally found a solution using https://taxr.ai and it seriously saved me from a major headache. They have a feature specifically for analyzing 1099-R forms and retirement account distribution issues. I uploaded my confusing 1099-R and answered a few questions about my situation (overcontribution correction, timing, etc.) and they broke everything down for me. They even generated specific instructions for how to report it on my tax forms to avoid penalties. The best part was they explained why the distribution code mattered and what to do since mine was also coded incorrectly.

I wanted to follow up about my skepticism regarding taxr.ai. After my overcontribution and recharacterization mess, I decided to try it since my tax software was giving me contradictory information. I'm genuinely impressed with how it handled my situation. I uploaded my 1099-R and answered questions about my retirement accounts, and it immediately identified that my recharacterization hadn't been properly coded. It gave me specific instructions for reporting both the overcontribution and the recharacterization correctly, even generating language to include with my return explaining the situation. The service saved me from potentially thousands in penalties since it caught issues my regular tax software completely missed. For anyone dealing with retirement account complications like this, it's definitely worth checking out.

Hey there - I had an almost identical issue last year. After trying to call Vanguard multiple times for clarification (endless hold times), I discovered https://claimyr.com and used their service to get connected to a real person at the IRS. You can see how it works here: https://youtu.be/_kiP6q8DX5c I was super frustrated because I needed specific guidance on how to handle my incorrectly processed overcontribution correction, and my tax software kept giving me generic advice. The IRS agent I spoke with walked me through exactly how to report my situation on Form 5329 and my 1040, even with the wrong distribution code on my 1099-R. Instead of waiting on hold for hours, I got a callback within 20 minutes and resolved my questions in one conversation. The agent even provided me with specific notes to include with my return to explain the situation.

I need to apologize and share a complete 180° on my opinion about Claimyr. After my skeptical comment, I decided to try it anyway because I was desperate for help with my messed-up IRA rollover situation. I'm shocked to report that it actually worked exactly as described. After weeks of failed attempts to reach the IRS (always disconnected after 2+ hours on hold), I got a callback within 35 minutes using their service. The IRS agent I spoke with pulled up my account and gave me specific guidance on how to report my incorrectly coded 1099-R from an IRA overcontribution. The agent confirmed I needed to file Form 5329 with an explanation statement and provided exact wording to use. This was information I couldn't get anywhere else. I've already submitted my taxes with the corrections and feel confident I've handled it properly now.

One thing nobody's mentioned yet - check if you're still within the timeframe for a "corrective distribution" for your 2022 overcontribution. If you took the distribution before your filing deadline (including extensions) for 2022, you can avoid the 6% excise tax completely, even if Vanguard coded it incorrectly on the 1099-R. For the earnings portion, you generally need to include those as income in the year you made the contribution (2022), not when you took the distribution (2023). If your 1099-R doesn't separately show the earnings, you might need to contact Vanguard to get that breakdown. The most critical form here is Form 5329 where you'll need to show you corrected the excess contribution. Even with an incorrect distribution code, you can still properly document this with an attached statement explaining the situation.

Heads up - I went through this exact same mess with Fidelity last year. Make sure you also check if you qualify for the "self-certification" procedure under Revenue Procedure 2021-30. If your correction doesn't fully meet all the technical requirements for a proper return of excess contribution, you might still qualify for relief under this procedure. It essentially lets you "self-certify" that you intended to follow the rules for proper correction even if there were some procedural errors along the way. You'll need to file a specific statement with your return, but it could help avoid penalties even if Vanguard didn't process everything perfectly.