1. No, you need to report the earnings in the year for which you made the contribution, that is how the law is written. Therefore, you will have to report the earnings on an excess contribution for 2020 in 2020.
Yes, if your Roth contribution was limited by your Modified Adjusted Gross Income (MAGI) then the earnings will increase your income, and then you might have another excess contribution. That is why it is recommended to withdraw some extra if you had a lot of earnings. If you have this issue that you have a new excess contribution after adding the earnings then you can make just a regular distribution (without the earnings) since it is after the due date of the 2020 tax return. This distribution would be reported on your 2022 tax return but it would not be taxable. You would have to pay the 6% penalty on this new excess for 2020 and 2021.
2. Yes, you do not need to pay the 6% penalty on the original excess since you withdrew that excess plus earnings before the due date of the 2020 tax return. But if the earnings of the original excess contribution create a new excess contribution then you will have to pay the 6% penalty on the new excess contribution for 2020 and 2021.
3. You should only have to enter your Form 1099-R. The earnings should be listed in box 2a. TurboTax should automatically calculate them on Form 5329 part I. What is the code on your Form 1099-R?
- Click on the "Search" on the top right and type “1099-R”
- Click on “Jump to 1099-R”
- Enter you Form 1099-R
- Click "Continue"
- On the "Which year on Form 1099-R" screen say that this is a 2022 1099-R.
- Click "Continue" after all 1099-R are entered and answer all the questions.
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