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@sussings2 wrote:

Thank you. So, the earnings are taxable in 2019, even though they all accrued in 2020? I made the contribution in February of this year for 2019.

 

I have not yet filed my taxes for 2019; I'm working on them now. I can't use TT because I have to send a statement explaining the distribution. I do know the exact amounts. Can I attach a "dummy" 2020 1099-R to my tax return? 


Earnings on a returned contribution are taxable in the that year that the contributions was *for*, not the year made or returned.

 

You can use TurboTax to report this with the required explanation statement.

 

*IF* you requested a return of contributions due to an excess contribution and the excess was removed before the extended due date of the 2019 tax return and the earnings were also returned and you know that the IRA custodian will report this as a return of contribution and not as a normal IRA distribution - then:

You can just report it now and ignore the 2020 1099-R when it comes.


You would enter the 2020 1099-R with the total distribution in box 1 (contribution plus the earnings),

The earnings in box 2a,

Check the IRA/SEP/SIMPLE box.

Enter code "P" in box 7 - don t worry that it will say "taxable in 2018 "

Enter code "1" in box 7 if under age 59 1/2 (lower box 7).

On the "Which year" screen say that this is a 2020 1099-R.

After the 1099-R summary screen press continue.

If you are over 59 1/2 then on the "Lets see if we can lower your tax bill" enter the box 2a amount in the "Another Reason" box to eliminate the 10% early withdrawal penalty on the earnings.

Enter the explanation for the excess contribution and that you are reporting a 2020 1099-R on your 2019 tax return to avoid having to amend in 2020.

The box 2a earnings will be taxable income reported on line 4b on the 1040 form and if under age 59 1/2 will also be subject to a 10% penalty on a 5329 form.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

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