Yes, the earnings will be taxable and subject to the 10% early withdrawal penalty (if you are under 59 1/2). Earnings on an excess contribution have to be reported in the year the contribution was made for. Therefore, the earnings on an excess contribution for 2021 have to be reported on your 2021 tax return.
To confirm, it seems you only entered on your 2021 tax return that you withdrew the excess contribution (on the penalty screen during the IRA contribution interview) but you didn't create Form 1099-R to report the distribution (as Tax Expert SharonD007 had assumed)?
If you didn't create Form 1099-R for the distribution of the excess contribution and earnings then you will have to amend your 2021 tax return to report it.
- Login to your TurboTax Account
- Click on the "Search" on the top right and type “1099-R”
- Click on “Jump to 1099-R”
- On the "Which year on Form 1099-R" screen say that this is a 2022 Form 1099-R.
- Click "Continue" after all 1099-R are entered and answer all the questions.
- Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings under "Another reason" if you are over 59 1/2 (if you are under 59 1/2 click "Continue")
@arsdean
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