Yes, you will enter the excess contribution amount of $3,590 (excess amount for 2021) as withdrawn on the penalty screen during the IRA contribution interview.
Yes, if now because of the taxable earnings your MAGI is over the limit to make any Roth IRA contribution then you will have to request a regular distribution of the amount. If you have less than the excess amount in the Roth IRA account then withdraw the rest and the penalty will stop when the Roth IRA is $0.
Yes, you will have to add the new excess in your 2022 return. You will enter line 24 of the 2021 Form 5329 as the excess from prior years in the 2022 tax return:
- Click "Federal Taxes" on the top and select "Wages & Income"
- Click "I'll choose what to work on"
- Scroll down and click "Start/Edit" next to "IRA, 401(k), Pension Plan (1099-R)"
- Click "Continue" on the "Review your 1099-R info" screen
- Answer all the questions and make sure you enter the net contributions prior to 2022 on the "Enter Prior Year Roth IRA Contributions" screen
- On the "Do you have any Excess Roth Contributions" answer "Yes"
- On the "Enter Excess Contributions" screen enter line 24 of the 2021 Form 5329.
The amount that will show on your 2022 Form 5329 line 24 will be the excess that has to be removed in 2023 (unless your value is less, then just remove the amount left in the Roth IRA).
@ChiMing
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