Any investment earnings your excess contributions generated while in your account will have to be reported on your taxes as income in the year you made the contributions to your IRA. In other words, you will have to report the earnings on your 2023 tax return. You will receive a Form 1099-R for the 2024 distribution in 2025. You can wait until you receive the 1099-R and amend your 2023 return. Or you can go ahead and enter it on your 2023 tax return. To create a 1099-R in your 2020 return please follow the steps below:
- Open your return
- Click on the "Search" on the top and type “1099-R”
- Click on “Jump to 1099-R”
- Select "I'll type it in myself"
- Box 1 enter total distribution (contribution plus earning)
- Box 2 enter the earnings
- Box 7 enter P and J
- On the "Which year on Form 1099-R" screen say that this is a 2021 1099-R.
The withdrawal of earnings on excess contributions is no longer subject to the 10% excise tax (penalty) for early withdrawal.
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