Yes, the earnings are taxable in 2020 and therefore will increase your MAGI, therefore it is recommended to withdraw some extra if you had a lot of earnings.
Since the due date of the 2020 tax return has passed and you didn't remove the excess by December 31, 2021, you will need to pay the penalty for 2020 and 2021 on the $1,170 excess contribution. But the good news is since it is after the due date you will only have to remove the excess and no earnings. You will request a regular distribution for the $1,170 and this will go on your 2022 return.
To get the penalty calculated on your 2021 return:
- Login to your TurboTax Account
- Click on "Search" on the top right and type “IRA contributions”
- Click on “Jump to IRA contributions"
- Select “Roth IRA”
- On the "Do you have any Excess Roth Contributions" answer "Yes"
- On the "Enter Excess Contributions" screen enter the total excess contribution from 2020
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
