1 and 2) If you leave the excess contribution in the Roth IRA then you will have to pay the 6% penalty tax. When you prepare the 2021 tax return TurboTax will asked if you had excess contributions in prior years then you will enter the amount and TurboTax will ask how much you want to apply to 2021.
3)It depends, if you met the 5 year rule then you will have a qualified distribution and this will not be taxable.
What Are Qualified Distributions?
A qualified distribution is any payment or distribution from your Roth IRA that meets the following requirements.
- It is made after the 5-year period beginning with the first taxable year for which a contribution was made to a Roth IRA set up for your benefit, and
- The payment or distribution is:
- Made on or after the date you reach age 59½,
- Made because you are disabled (defined earlier),
- Made to a beneficiary or to your estate after your death, or
- One that meets the requirements listed under First home under Exceptions in chapter 1 (up to a $10,000 lifetime limit). (IRS)
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