Get your taxes done using TurboTax

1. Yes, the earnings are taxable and subject to the 10% early withdrawal penalty since you are under 59 1/2.

2. Yes, you will enter $0 when TurboTax asks about any “prior year excess contribution”.  After you entered your Roth contribution you will get a penalty and have the option to enter the $6,000 withdrawn by the due date. Then TurboTax will not calculate the 6% penalty.

3, 5, and 6: You will get a 1099-R 2022 in 2023 with codes J and P for the withdrawal of excess contribution and earnings. This 1099-R will have to be included on your 2021 tax return and you have two options: 

• You can wait until you receive the 1099-R  2022 in 2023 and amend your 2021 return or
• You can report it now in your 2021 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 2022 1099-R into the 2022 tax return since the withholding is reported in the year that the tax was withheld. The 2022 code P will not do anything in 2022 tax return but the withholding will be applied to 2022.

To create a 1099-R in your 2021 return please follow the steps below:

1. Login to your TurboTax Account 
2. Click on the "Search" on the top right and type “1099-R”
3. Click on “Jump to 1099-R”
4. Answer "Yes" to "Did you get a 1099-R in 2021?"
5. Select "I'll type it in myself"
6. Box 1 enter total distribution (contribution plus earning)
7. Box 2a enter the earnings
8. Box 7 enter J and P
9. Click "Continue"
10. On the "Which year on Form 1099-R" screen say that this is a 2022 1099-R.
11. Click "Continue" after all 1099-R are entered and answer all the questions.

Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2020" you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2021.

4. If your AGI is $9,000 and you add the $600 earnings but you have a standard deduction of $12,550 as a single then you will still have a taxable income of $0. Therefore, you will only pay the 10% penalty on the earnings ($60).

7. There are exceptions to the 10% but none that apply in your case. Please see IRS Exceptions to Tax on Early Distributions for details.

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