TP received 2010 1099R Distribution Code P1 for excess contribution made to SEP in 2009.
My understanding is that I amend the 2009 return to show the line 15 income subject to 10% penalty.... and there should be no entries for 2010.?
No, you must input this 1099R, but you will see nothing on the 2010 return.
Then amend 2009.
Was the excess deferral reported on line 7 of the original 2009 return? According to publication 525, page 10 a code P is used to report distributions of excess deferrals that occurred in 2009 and should have been reported on line 7 of the 1040 in 2009. According to the publication if this distribution occurred after april 15th 2010 then in addition to adding it to wages on a 2009 amended return, it also has to be added to the wages for the 2010 return as well. (It is essentially taxed twice). As for the 10% penalty, that will only apply to earnings that accumulated on the deferral (which I am guessing will not be very much).
No line 7... Schedule C filer with IRA/SEP...
TP exceeded max contribution to her IRA/SEP in 2009. The money was withdrawn (from the IRA annuity) before the 09 return was filed. The correct 2009 IRA/SEP deduction was taken on line 28.
She paid tax on the 10K (which was included in her Sch C) in 2009 so I think I amend the 2009 return to show change to 1040 line 15a as 10K and 15b as 0.
If that is the correct way to handle this, then the only open issue would be the amount of additional earnings the 10K caused for the time it was inside the IRA.
