Get your taxes done using TurboTax

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The IRS letter said that my custodian submitted a form that I didn't include in my return, which is true since I forgot to include the 1099R for my 2019 tax year. Just looking at the 1099R without the context, the IRS is treating the $16,500 removal of prior years excess contributions as "retirement income" and taxing the full amount as income (it says I owe %5,594 in additional taxes before interest, underpayment penalties, etc.). Nothing in the form specifies that this is removal of prior year contributions.

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Your own contributions that are distributed are not taxable.

Call the IRS number on the letter and tell them it was a removal of your own contributions.   If they want an amended return then:

For that you should amend 2019 and send the amended return to the address on the letter.

Enter it this way:

You can always withdraw your own Roth contributions tax and penalty free.

Enter a 1099-R here:

Federal Taxes,
Wages & Income
I’ll choose what I work on (if that screen comes up),
Retirement Plans & Social Security,
IRA, 401(k), Pension Plan Withdrawals (1099-R).

OR Use the "Tools" menu (if online version under My Account) and then "Search Topics" for "1099-R" which will take you to the same place.

Be sure to choose which spouse the 1099-R is for if this is a joint tax return.
Be sure to pick the correct 1099-R type: Standard 1099-R, CSA-1099-R, CSF-1099-R, RRB-1099-R.

[NOTE: When you get to the "Your 1099-R Entries" screen where you can add another 1099-R, use "continue" to keep going as there are additional interview questions after that screen in most cases. You can always return as shown above.]

One of the followup questions will ask for your prior year** contributions not previously withdrawn. Those contributions that still remain in the Roth will not be taxed or subject to a early withdrawal penalty. That will add a 8606 form to your tax return with the Roth contribution and tax calculation in part III.

Note: **Prior year - any current year Roth contributions should be entered into the IRA contributions section. They will not show up in the prior years contributions but will be accounted for on the 8606 form that calculates the taxable amount.