Yes, you will have to pay the 6% penalty for 2020 and for 2021 because you didn't remove the 2020 excess contribution to the Roth IRA until 2022. Since it was after the extended due date of the 2020 tax return you should have requested a regular distribution (without earnings) and received Form 1099-R with code J. Entering a Form 1099-R with code J on your 2022 tax return would remove the excess carried over from prior years on Form 5329.
It seems you got Form 1099-R with codes P and J? This would indicate that you got a contribution for 2021 plus earnings returned in 2022. And this would belong on your 2021 return. You might want to check with your financial institution if they will correct the form. Or you can file a substitute Form 1099-R with code J only and enter it on your 2022 tax return.
To file a substitute Form 1099-R:
- Login to your TurboTax Account
- Click on "Search" on the top right and type “1099-R”
- Click on “Jump to 1099-R”
- Select "Change how I enter my form" on the "Let's import your tax info" screen
- Select "Type it myself"
- Fill out Form 1099-R and use code J in box 7 only
- Continue through the questions until the "Do any of these situations apply to you?" screen select "I need to file a substitute 1099-R"
- Continue through the question
- Click "Continue" on the "Review your 1099-R info" screen
- Answer all the questions and make sure you enter the net contributions prior to 2022 (include the 2020 excess contribution) on the "Enter Prior Year Roth IRA Contributions" screen
- Answer the remaining question.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
