Retirement tax questions

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@sheilabudi wrote:

Thank you for your advise.  To clarify, I opened a 13-monthe CD on Feb 28, 2020 for 2019 traditional IRA contribution. The bank says there will be penalty and interest being forfeited to withdraw it now before March 28, 2021.  Since I opened it in Feb 2020 and plan to withdraw it now in Aug 2020, so I said it is a same year reversal.  Anyway, I will withdraw and report any earnings if any by Oct 15.  I guess that is the best bet to avoid the 6 percent IRS penalty.

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If it was a *2019* contribution made *in* 2020 then it is a 2019 contribution, not a 2020 contribution.    There is no "March 2021 date" for a 2019 contribution, in fact there is no March 28 date at all.      I suspect that the bank as referring to the *banks*  own penalty for early CD withdrawals from a 13 month CD that has nothing to do with the tax laws for excess IRA contributions.  

See IRS Pub 590A:

https://www.irs.gov/publications/p590a#en_US_2019_publink1000230716

[Note that the IRS pub is a 2019 pub so it gives 2018 & 2019 dates and the "April 17th" date was July 15 for 2020 because if the COVID-19 extension - so adjust dates accordingly - the tax law is the same for 2021.  The "plus extensions" means a timely extension request or a timely filed 2019 tax return that creates an automatic extension to Oct 15, 2020. ]

If any part of these contributions is an excess contribution for 2018, it is subject to a 6% excise tax. You won’t have to pay the 6% tax if any 2018 excess contribution was withdrawn by April 17, 2019 (plus extensions), and if any 2019 excess contribution is withdrawn by April 15, 2020 (plus extensions). See Excess Contributions under What Acts Result in Penalties or Additional Taxes , later.

You won’t have to pay the 6% tax if you withdraw an excess contribution made during a tax year and you also withdraw any interest or other income earned on the excess contribution. You must complete your withdrawal by the date your tax return for that year is due, including extensions.