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To verify, you made an excess contribution for 2021 and withdrew the excess and earnings in 2022?

If yes, then the earnings will be taxable in 2021 and are subject to the 10% early withdrawal penalty if you are under 59 1/2 (calculated on Form 5329 part I). TurboTax will create Form 5329 when you enter Form 1099-R for the removal of excess contributions and earnings.

 You will get a 2022 Form 1099-R  in 2023 with codes P and J 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 2022 Form 1099-R 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 Form 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 to the 2022 tax return but the withholdings will be applied to 2022.

To create a Form 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.
12. Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings under "Another reason" if you are over 59 1/2 (if you are under 59 1/2 click "Continue")

Please make sure, that you enter the excess contribution as withdrawn during the IRA contribution interview, to avoid that TurboTax calculates the 6% penalty in part IV of Form 5329.

1. Click on "Search" on the top right and type “IRA contributions” 
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. Continue until the penalty screen and enter the contribution amount as withdrawn before the due date.