Hello everyone,
I know this question has been asked before but I have yet to get a consensus on the answer. I'll make this short and concise.
Started a Roth IRA for the first time October 2020 and deposited $6000.
Fast forward February 2021, got my W2 and realized I over contributed $2000 and $100 in market gains.
Going to file the 5329 saying I contributed $6000 and removed $2000 plus $100 in earnings in the market.
I have not filed yet and trying to take care of this before filing.
The account is with Schwab and my question is and where the conflicted answers are.
1. One answer I've seen is that all I need is to file the 5329 and the 1099-R will come on 2022 for the 2021 Tax year because I withdrew the excess in 2021 therefore that income / penalty will apply for 2021.
2. Another answer is that when I receive the 1099-R for 2021, the earnings will be considered 2020 income and I would need to amend my 2020 Tax Return. Some even suggested to submit a dummy form for 2020 before filing to remove the need to amend the return.
I understand this will also depend on if a P or an 8 is checked on the 1099-R. I feel like Schwab is a big brokerage so they would be following standard procedure for this. This excess / gains will be removed this month in 2021 so I don't see how it can count for the Tax Year 2020. Really confused.
Can someone please answer this question. If it's not clear I can clarify this more if needed.
