Thank you so much for this post. This is the most useful post I can find on the internet regarding this issue. A lot of websites tells you how to remove excess contributions and the consequences, but don't say anything about how to report it to IRS.
https://github.com/yinshiyi/excess_ira/tree/main#readme
I have a question about my third row attached here.
| excess contribution period | contribution count towards | removal of excess contribution by early distribution | what to do |
| 2022/1/1-2022/12/31 | 2022 | 2022/1/1-2022/12/31 | 1099-R 2022 will arrive in 2023 Jan, file normally, the Net income attributable (NIA) is defined as taxable for 2022 |
| 2022/1/1-2022/12/31 | 2022 | 2023/1/1-2023/4/18 | make a 1099-R for 2023 with code P/J in box 7，don’t report this excess on 2022-8606 (since we took it out by 4/18, report in 1040 4a, 4b for taxable gain on NIA, additional 10% penalty tax on NIA report on Schedule 2 (Form 1040), line 8, (5329 Line1 is optional according to below); when real 1099-R 2023 arrived, file that on 1040-2023 (get the withholding tax back? since 10% penalty is paid already on 2022 tax) |
| 2023/1/1-2023/4/18 | 2022 | 2023/1/1-2023/4/18 | 1099-R 2023 will arrive in 2024 Jan, the NIA gain from this type of contribution is taxable in 2023 tax (or 2022 tax?).
I think one has to make a 1099-R also, but cannot use code P/J in this case. I believe the code is 8/J |
| 2023/1/1-2023/12/31 | 2023 | 2023/1/1-2023/12/31 | 1099-R 2023 will arrive in 2024 Jan, the NIA gain from this type of contribution is taxable in 2023 tax |
the interpretation of 590-B is not very explicit in my opinion
instruction from 590-B
Withdrawals of contributions by due date. If you withdraw contributions (including any net earnings on the contributions) by the due date of your return for the year in which you made the contribution, the contributions are treated as if you never made them. If you have an extension of time to file your return, you can withdraw the contributions and earnings by the extended due date. The withdrawal of contributions is tax free, but you must include the earnings on the contributions in income for the year in which you made the contributions.
5329 instruction excerpt
You received a distribution subject to the tax on early distributions from a qualified retirement plan (other than a Roth IRA). However, if distribution code 1 is correctly shown in box 7 of all your Forms 1099-R and you owe the additional tax on the full amount shown on each Form 1099-R, you don’t have to file Form 5329. Instead, see the instructions for Schedule 2 (Form 1040), line 8, in the Instructions for Form 1040, or the Instructions for Form 1040-NR, for how to report the 10% additional tax directly on that line.
8606 instruction excerpt
You include $1,073 on your 2021 Form 1040, line 4a, and $73 on line 4b. You attach a statement to your tax return explaining the distribution. Because you properly removed the excess contribution with the related earnings by the due date of your tax return, you aren’t subject to the additional 6% tax on excess contributions, reported on Form 5329. However, because you were under age 59½ at the time of the distribution, the $73 of earnings is subject to the additional 10% tax on early distributions. You include $7.30 on Schedule 2 (Form 1040), line 8.
