I over contributed to my roth ira in 2020, I'm 29 years old. I over contributed by 4,000, when I noticed I had added too much I withdrew my over contribution plus the earnings, for a total of 4585.87 (585.87 of earnings)
added 2k in March 2020, 2k in October 2020, withdrew early December 2020.
I entered my 1099-R, it looks like im paying tax on the full 4585.87, since it was an over contribution all done within the current year, my understanding is that I should just be paying tax on the 585.87 (the earnings). Am I missing something? I don't see any prompts from Turbotax on how to explain that it's a removal of excess contributions and I'm paying about $1500 in tax on this. How do I proceed here, I would expect to only pay tax on the earnings.
1099-R
IRS Box Item Value
1 Gross Distribution $4,585.87
2a Taxable Amount $4,585.87
2b Taxable Amount Not Determined Yes
2b Total Distribution No
4 Federal Income Tax Withheld $458.59
7 Distribution Code(s) J8
7 IRA/SEP/SIMPLE No
14 State Tax Withheld $0.00
17 Local Tax Withheld $0.00
