DanaB27
Expert Alumni

Get your taxes done using TurboTax

Yes, you pay the 6% penalty on the $4,000 excess 2020 contributions by submitting Form 5329 amending 2020 taxes. All you need to do is enter your Roth IRA contribution and TurboTax will create Form 5329 to calculate the penalty.

 

 

 

You will also have to pay the 6% penalty for the 2020 excess contribution on your 2021 tax return since it wasn't removed by December 31, 2021. 

 

  1. Click on "Search" on the top right and type “IRA contributions”
  2. Click on “Jump to IRA contributions"
  3. Select “Roth IRA
  4. Enter the Roth contribution for 2021 of $500
  5. On the "Do you have any Excess Roth Contributions" answer "Yes"
  6. On the "Enter Excess Contributions" screen enter the total excess contribution from 2020 of $4,000 (if it wasn't carried over).
  7. On the penalty screen enter you removed the $500 excess contribution by the due date.

TurboTax will only calculate the penalty for the $4,000 excess 2020 contribution.

 

You will also report Form 1099-R with codes JP on your 2021 tax return. The earnings are taxable in 2021 and subject to the 10% early withdrawal penalty.

 

 

 

 

On your 2022 tax return, you will enter the excess contribution for 2020 (if it wasn't carried over automatically):

 

  1. Click on "Search" on the top right and type “IRA contributions”
  2. Click on “Jump to IRA contributions"
  3. Select “Roth IRA
  4. On the "Do you have any Excess Roth Contributions" answer "Yes"
  5. On the "Enter Excess Contributions" screen enter the total excess contribution from 2020 of $4,000 (if it wasn't carried over).

 

You will also enter the regular distribution Form 1099-R with code J:

 

  1. Login to your TurboTax Account 
  2. Click on "Search" on the top and type “1099-R” 
  3. Click on “Jump to 1099-R” and enter all your 1099-Rs
  4. Click "Continue" on the "Review your 1099-R info" screen
  5. Answer all the questions and make sure you enter the net contributions prior to 2022 (the $4,000 excess contribution is included in the amount) on the "Enter Prior Year Roth IRA Contributions" screen
  6. Answer the remaining question.

 

 

It seems you still will have a $200 excess contribution unless your Roth IRA was empty since you withdrew only $3800 of the $4,000 excess contribution. When making a regular distribution after the due date you will have to take the full excess amount (without considering earnings or losses).

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