@rjp123 wrote:
Minh answered your question. " What you earned will be covered by a 1099-R for the following tax year and will be entered then as a normal 1099-R."
You don't owe tax on the earnings made by an excess IRA contribution in 2019, but you owe tax on them in 2020.
The reason is because these earnings were likely earned on both years (2019 and 2020) so the IRS lets you (and the IRA administrator) defer reporting it until your 2020 tax return.
So, in early 2021, you will receive a 1099-R that shows the earnings on the excess, to put on your 2020 return.
You said that this was a 2020 1099-R with a code P. That is for a contribution that was *for* 2019 and removed prior to the due date of the 2019 tax return. That can ONLY be reported on an amended 2019 tax return just as TurboTax said to do when you entered it into 2020 TurboTax.
If that is incorrect and it was actual a 2020 contribution *for* 2020 then the 1099-R is incorrect and should have had a code 8 in box 7.
quote form your post
"You don't owe tax on the earnings made by an excess IRA contribution in 2019, but you owe tax on them in 2020."
That is incorrect. You never pay tax on the return of an excess contribution, you only pay tax on any earnings that are in box 2a and you pay that tax in the year that the contribution was *for* (2019), not the year removed.
**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.**
