Prior to filing our 2020 taxes, my husband and I realized we over contributed to our ROTH-IRA.
Before filing the 2020 taxes, we withdrew the excess contribution plus the earnings on the contribution.
We did not file Form 5329 at that time indicating the excess contribution.
In 2021, we got issued Form 1099-R with codes J and P specified. The tax program indicates that this was taxable in 2020 (J code).
Questions are:
- Do we need to amend our 2020 return when filing Form 5329?
- If so, how do we fill out Form 5329? I assume that Line 23 on this form should specify the excess contribution. If that is done, Line 24 indicates to add lines 22 and 23 together. In our case, line 24 will be what is specified on line 23. The big question is that line 25 indicates that "Additional tax" is owned amounting to 5% of the excess contribution. However, we shouldn't be subject to the additional tax as the money was withdraw prior to filing our 2020 tax return.
- Are we required to file Form 8606 or any other forms? If so, does this need to be done on an amended 2020 return or should it be done on our 2021 return?
- Should the earnings be treated as income? If the earning should be treated as income, how or where should that this be reported?
- How would all of these situations be handled in TurboTax?
Thanks!
