I made $7000 Roth contribution on 4/10/2020 to my Roth IRA for the year of 2019 when I filed the turbotax 2019 return. Then I realized that I did not qualified for the contribution since I have no earned income. (by the way I think turbotax software had better to prohibit user to contribute if he or she does not have W2 form rather than always suggests users to contribute) Anyway I withdraw the $7000 contribution plus $8111 profit from the contribution on 12/31/2020 after 8 months. I've filed amendment for my 2019 return in January 2021 and paid 6% ($420) penalty for the contribution.
I received 1099R form about this transaction for the year of 2020. The box 1 shows total withdraw $15111, and box 2 shows taxable amount $8111 ($15111 minus $7000). The box 7 shows code 8J. I can understand 8 means return the excessive contribution. What I don't understand is the code J which means "early withdraw". I was way over 60 in 2019 and have Roth account for more than 5 years. I called Fidelity retirement specialists about this box7 code multiple times. They told me the same, it is by design whenever withdraw the excessive contribution. The computer will automatically generate code 8J indication the box 2 is taxable and they have no way to change it. They suggest me to check with turbotax to see if it can avoid to pay the 10% ($811) penalty for early withdraw because I am not supposed to. I run the turbotax program and updated the form several times and I don't see any dialog or question that I can answer to alter the result. Hope some one can help. Thanks!
