@aa73 wrote:
Thank you for clarifying!
My 2020 return did not have a 1099-R form. Only Part IV was filled out on my 2020 Form 5329.
A 2021 code PJ means a Roth excess taxable in 2020, not 2021. The tax on the earnings must be paid in the year that the contribution was for, not returned. When you enter the 2021 1099-R in the 2020 software it will ask which year the 1099-R is for - say 2021 and that will properly tax the box 2a amount. When it asks for prior Roth contributions include the excess contribution amount so it will not be taxed.
If you filed a 5329 and paid the 6% penalty in 2020 then delete that 5329 form and include in the explanation for the 2020 amended return that the 5329 originally filed was incorrect and there is no 6% penalty or 5329 form since the excess was timely returned in 2021 before the due date..
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
