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After you file
@AmyC is correct.
- There is no early withdrawal penalty on your distribution because it was a “recharacterization,” moving from one type to IRA (Roth) to another (Traditional).
- You do not have to amend your 2019 tax return because your “recharacterization” took place in 2020 (even though it involved 2019 taxes).
- The 1099-Rs explain exactly what you did to remove the excess contribution penalty. So the IRS will not send any penalties or letters.
- You do not have to withdraw the $168 from your Traditional IRA because the money represents earnings from the account, not a contribution. In 2019 your put after tax money into a Roth, but your income was too high for a Roth contribution. As a result, you “recharacterized” your contribution as a non-deductible Traditional IRA contribution (because you made too much for an IRA deduction as well). The $168 is never taxed earnings so it is taxable on your 2020 return. Someday when you withdraw money from the Traditional IRA you will have a mix of never taxed earnings and previously taxed money so part of the distribution will be non-taxable. TurboTax will track your IRA “basis”.
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January 19, 2021
4:15 PM