Excess ROTH-IRA Contribution for prior tax year

[kcottrel]

Prior to filing our 2020 taxes, my husband and I realized we over contributed to our ROTH-IRA.
Before filing the 2020 taxes, we withdrew the excess contribution plus the earnings on the contribution. 
We did not file Form 5329 at that time indicating the excess contribution.

In 2021, we got issued Form 1099-R with codes J and P specified. The tax program indicates that this was taxable in 2020 (J code).

Questions are:

• Do we need to amend our 2020 return when filing Form 5329?
• If so, how do we fill out Form 5329?  I assume that Line 23 on this form should specify the excess contribution. If that is done, Line 24 indicates to add lines 22 and 23 together.  In our case, line 24 will be what is specified on line 23. The big question is that line 25 indicates that "Additional tax" is owned amounting to 5% of the excess contribution. However, we shouldn't be subject to the additional tax as the money was withdraw prior to filing our 2020 tax return.
• Are we required to file Form 8606 or any other forms? If so, does this need to be done on an amended 2020 return or should it be done on our 2021 return?
• Should the earnings be treated as income? If the earning should be treated as income, how or where should that this be reported?
• How would all of these situations be handled in TurboTax?

Thanks!

[FangxiaL]

Here are my answers to your questions:

• You need to use the 2021 1099-R form to amend your 2020 tax return. In Box 2a, only the earnings should be in that box. Since it is the contribution for 2020, the earnings are subject to income tax plus 10% additional tax.
• Did you enter the Roth IRA contribution on your 2020 return? If so, Form 5329 should be part of your 2020 return already.
• Do Not enter the 1099-R on your 2021 tax return (ignore it for 2021 taxes).

For help with amending your 2020 return, please read this help article: How do I amend my 2020 return?

[kcottrel]

I took a closer look at our 2020 return and form 5329 was never filled out nor was it submitted as part of our 2020 tax return. 

When I went through the TurboTax interview process for the 2020 return it did detect that we had over contributed to the ROTH-IRA.  If TurboTax was able to detect this, it seems like it ought have included Form 5329 at that point.

Would you know how exactly am I supposed to fill out this form in TurboTax? Do I need to manually do that form in TurboTax?  How do I answer the original questions that I had posed in my original post regarding filling out Form 5329?

Thanks for your assistance! 

[DanaB27]

You do not need to file Form 5329 Part IV for the excess contribution on your 2020 tax return since you withdrew the excess plus earnings before the due of the 2020 tax return.

But you will file Form 5329 Part I if you are under 59 1/2 for the 10% early withdrawal penalty on the distributed earnings from the withdrawal of excess contribution plus earnings. All you have to do is enter your Form 1099-R and TurboTax will create Form 5329.

If you are over 59 1/2 then you can avoid the 10% early withdrawal penalty by entering the distribution on the "Did you use your IRA to pay for any of these expenses?" screen and entering the distribution amount under "Another reason". 

@kcottrel