Per Champ @DJS:
"There are several ways to correct an excess contribution to an IRA.
- Withdraw the excess contribution and earnings. In general, you can avoid the 6% penalty if you withdraw the extra contribution and any earnings before your tax deadline. You must declare the earnings as income on your taxes.
- File an amended tax return (if you’ve already filed). You can avoid the 6% penalty if you remove the excess contribution and earnings and file an amended return by the October extension deadline.
- Apply the excess to next year’s contribution. Doing this on a future tax return won’t get you off the hook for the 6% tax this year, but at least you’ll stop paying once you apply the excess.
- Withdraw the excess next year. If you don't do one of the other options first, you can withdraw the excess funds by Dec. 31 of the following year. You can leave the earnings in, but you must remove the entire excess contribution to avoid that 6% penalty for the following year"
If you choose to Amend your already-filed 2021 return and add the 2022 1099-R (year funds were withdrawn) with Codes J,P in Box 7, and Earnings in Box 2a, you don't need to Amend your 2020 return also.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
