1. Yes, the gains (earnings) are taxable in the year the excess contribution was made.
2. To confirm the 2024 From 1099-R has code PJ in box 7? If yes then this will have to be reported on your 2023 return. If you didn't add this 2024 Form 1099-R when you filed the 2023 return then you will have to amend the 2023 return. Please see How do I amend my federal tax return for a prior year? Only the earnings in box 2a are taxable.
- Login to your TurboTax Account
- Click on the "Search" on the top right and type “1099-R”
- On the "Which year on Form 1099-R" screen say that this is a 2024 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 "Corrective distributions made before the due date of the return".
Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2022" but you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2023.
If you had any taxes withheld then you will have to enter the 2024 Form 1099-R with code PJ also on your 2024 return to get the withheld taxes applied to 2024 since the withholdings are reported in the year that the tax was withheld. The 2024 code P will not add anything to your income in the 2024 tax return but the withholdings will be applied to 2024.
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