@pidgessn wrote:
I submitted a 'Request a recharacterization or remove an excess IRA contribution' form to Schwab where it said 'amount of contribution attributable to the excess' is $1500, 'Contribution date' is '09/22/2020' and 'tax year of contribution' is 2020
They should have rejected such a request made in 2022. Because they should have rejected the request, it's not clear if they calculated the Net Income Attributable based on the 9/22/2020 contribution date you indicated (which was an inappropriate calculation) or if they processed a return of a portion of your 2021 Roth IRA contribution based on the date of your 2021 Roth IRA contribution.
The problem is how to explain all of this to the IRS. You could treat the distribution as not applying to your 2021 Roth IRA contribution and treat the distribution as a regular distribution in 2022 by filing a substitute Form 1099-R with $2,149 in box 1, a blank box 2a, box 2b Taxable amount not determined marked and code J in box 7. Doing so would mean that you have an excess contribution for 2021 in addition to the excess contribution for 2020. Otherwise you would have to figure out what the Net Income Attributable would have been on a return of some amount of your 2021 Roth IRA contribution such that the distribution would have equaled $2,149. You would then be able to apply some or all of the $1,500 excess contribution from 2020 as part of your 2021 contribution, reducing or eliminating the excess contribution penalty for 2021. Either way, if you did not include the excess $1,500 2020 contribution on your 2021 Form 5329, you'll need to amend your 2021 tax return to at least report this excess and possibly also report the return of part of your 2021 Roth IRA contribution if you go that route.
