Hi everyone,
I'm currently in the process of filing my taxes and realized that I contributed an excess of $3800 over my allowed limit for tax year 2020. This contributions were made on year 2020 and I have just withdrawn them before the tax deadline this year in 2021, along with around $270 in gains.
Since I made the withdrawals this year, I won't be receiving a 1099-R until next year, so I'm really confused on how I should be paying taxes for the income generated by the excess contribution. I've done some research online and it seems that I should use one of distributions codes J8 or JP.
I'm currently inputting this information into TurboTax, if I choose distribution code JP and mention that the form I will be receiving has a year of 2021, then TurboTax makes the assumption that I will have to pay a 6% penalty for the $4070 total removed plus 10% in early withdrawal on the $270 gains (I believe this is wrong since the excess was removed by the deadline). If I choose year 2020, then the additional tax I have to pay is only 10% of the $270 in gains.
My assumption is that I should choose year 2020 and code JP since I have withdrawn any excess contributions in time, but I've read some conflicting information about choosing the the year when the removal was made when TurboTax asks "Which Year on Form 1099-R? Look at the year on your Form 1099-R. Does it show 2020 or 2021?"
One thing I'm confused about is that if I choose 2020, it tells me I may need to amend my 2019 return.
I would greatly appreciate it if someone could help me out.
