Level 3

Filing tax with excess/unwanted Roth Contribution

75yo mother made a $7k Roth Contribution for 2019 on 3/5/2020 and filed 2019 taxes before 4/15/2020 deadline. Processed an unwanted withdraw of this contribution on 5/27/2020 at a loss (bearish market). It is an unwanted withdraw (rather than excess) due to our mistake. We mistakenly thought it was a 2020 Roth IRA contribution (no earned income so don't qualify) rather than 2019 (had earned income so qualifies). So processed the unnecessary excess contribution. Thus, we'll call it "unwanted" contribution post mortum.


Just got a 1099-R coded 8J. 8 is correct since contribution and withdraw is in the same calendar year. Box 2a = $0 since it was a loss.


Question is what to do to file taxes. This is my understanding




- No penalty since this was just a return of contribution and withdraw by extension filing date (10/15/2020)




- File amended return with in 6mo of extension filing date so have until 3/15/2021

- Write "Filed pursuant to Section 301.9100-2" on top of 1040X

- Delete the $7k contribution. TTax tracked basis will be corrected accordingly

- Provide an explanation




- Include 2020 1099-R

- No tax impact since box 2a = $0

- No need to file 5329


Is this understanding correct?