positive earnings allocable to the excess are included in income on 1040 Line 4b for the year of the contribution. negative earnings are ignored; in any case, for purposes of basis, consider the original contribution amount as returned.
"Include the earnings in income for the year in which you made the contributions, not the year in
which you withdraw them."
"Should I just file a 1040-X with the increase in taxable income, and explanation in Part II?"
That's the easiest way if you are willing to mail the 1040-X.
Note: Do not include your old 1040 nor your revised 1040 because the Form 1040-X reflects any changes there and becomes your new tax return.
Form 5329 is not needed because the penalty for withdrawal before age 59 1/2 has been eliminated starting in 2023.
1040-X Line1 Col B will show the tax on amount of the allocable earnings.
@Michigan Man
