After you file

If you filed your 2021 tax return showing the 6% penalty for the excess contribution then you will have to remove the penalty by entering that you removed the excess contribution of $4,000 on the penalty screen during the IRA contribution interview when you amend your 2021 tax return.

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 in your 2021 tax return. 

To enter the 2022 Form 1099-R in your 2021 amended return please follow the steps below:

1. Click on the "Search" on the top right and type “1099-R” 
2. Click on “Jump to 1099-R”
3. Answer "Yes" to "Did you get a 1099-R in 2021?"
4. Select "I'll type it in myself"
5. Box 1 enter total distribution (contribution plus earning)
6. Box 2a enter the earnings
7. Box 7 enter J and P
8. Click "Continue"
9. On the "Which year on Form 1099-R" screen say that this is a 2022 Form 1099-R.
10. Click "Continue" after all 1099-R are entered and answer all the questions.
11. 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 be aware, code P will say in the drop-down menu "Return of contribution taxable in 2020" you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2021.

Please make sure that you do not select to withhold taxes when you request to remove the excess contribution and earnings with your bank.

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