Get your taxes done using TurboTax

Yes, you will have request a withdrawal of excess contribution plus earnings with your bank from the traditional IRA by the due date.

Only the earnings will be taxable in 2020 and if you are under 59 1/2 you will have to pay the 10% early withdrawal penalty.

If you withdraw the 2020 excess contribution plus earnings in 2021 before the due date, then you will get a 2021 1099-R in 2022 with codes P and 1 (if you are under 59 ½, otherwise enter P and 7). This 1099-R will have to be included on your 2020 tax return and you have two options: 

• You can wait until you receive the 2021 1099-R in 2022 and amend your 2020 return or
• You can report it now in your 2020 return and ignore the 1099-R when it comes unless there is Box 4 Federal Tax withholding and/or Box 14 State withholding. Then you must enter the 2021 1099-R into the 2021 tax return since the withholding is reported in the year that the tax was withheld. The 2021 code P will not do anything in the 2021 tax return but the withholding will be applied to 2021.

To create a 1099-R in your 2020 return please follow the steps below:

1. Login to your TurboTax Account 
2. Click on the Search box on the top and type “1099-R”
3. Click on “Jump to 1099-R”
4. Answer "Yes" to "Did you get a 1099-R in 2020?"
5. Select "I'll type it in myself"
6. Box 1 enter total distribution (contribution plus earning)
7. Box 2 enter the earnings
8. Box 7 enter P and 1 (if you are under 59 ½, otherwise enter P and 7)
9. Click "Continue"
10. On the "Which year on Form 1099-R" screen say that this is a 2021 1099-R.