I contributed the $6,000 in my roth IRA in 2021. Upon filing taxes, I realized I cannot contribute anything towards a roth due to my income. That contribution earned $1,565 in interest in 2021. I recharacterized the $6,000 plus earnings ($1565) before filing this year. I realize the $1,565 is subject taxes, but when I input codes J and P in box 7, as you recommend, I'm being penalized 16%. I thought the earnings of $1,565 was only subject to 6%?
Since code J applies to "Early Distribution of Roth IRA", it seems incorrect to select code J. Code N - "Recharacterized IRA contribution made for 2021", seems more appropriate. When I selected code N, my taxes owed equated to roughly 6% of the earnings made. Am I wrong in thinking this?
