Thanks DMertz. The code on line 7 of 1099-R says 1,P .
I consulted a TT CPA again and was pointed to this article,
"Under Revenue Procedure 2019-19, Appendix A, section .04, the permitted correction method is to distribute the excess deferral to the employee and to report the amount as taxable both in the year of deferral and in the year distributed. "
She is saying that since I did not get a corrected W2 I will be double taxed both in 2019 and 2020 but not 10% penalty since I took the money out before April 15th deadline. I also asked if I need to amend the 2019 tax return she said "no" as I already reported the $2000 as the income in 2019 and there is no need to add $100 in the 2019 tax return.
I am completely lost here and would need your input again. I am just trying to see if there is any way to avoid double taxation on this and how to best handle this case ?
Here is the link from IRS site:
https://www.irs.gov/retirement-plans/401k-plan-fix-it-guide-elective-deferrals-exceeded-code-402g-li...
I also noticed this in the article
"
Timely withdrawal of excess contributions by April 15
- Excess deferrals withdrawn by April 15 of the year following the year of deferral are taxable in the calendar year deferred.
- Earnings are taxable in the year they're distributed.
- There is no 10% early distribution tax, no 20% withholding and no spousal consent requirement on amounts timely distributed."
Is that reason that CPA told me last year while filing the 2019 tax return that the earnings are taxable in the year they are distributed , in my case the $100 is the earning and was taken in 2020.
Thanks
Kevin
