Okay tax gurus. This one's for you!
I had excess Roth IRA contributions for 2020 ($2,020). I removed the excess contributions, and the gains before the tax deadline in 2021. I received a 1099-R in 2022. I was instructed by Turbotax to file an amended return for my 2020 taxes (because the gains from the excess contribution have increased my AGI for 2020). I am in the process of amending my 2020 return in Turbotax. I added the 1099-R (that has 2021 on it, with distribution codes J and P) to my return.
Now here's the rub. By adding the 1099-R, I have now increased my AGI, which then affects how much I can put into my Roth IRA. Previewing the full tax return (all 900+ pages), form 5329 now says I have to remove an additional amount from my Roth IRA (I created an additional excess contribution ($420) by adding the gains from the 1099-R, which increased my AGI, which reduced my Roth IRA contribution allowed).
This looks to me like it is going to create perpetual amendments as I remove excess contributions and increase my AGI with the gains from the contributions, over and over again (because the previous 1099-R was gains, not losses, I'm pretty certain future excess contributions will have gains).
Am I doing something wrong here? Is this how this is supposed to be?
