*IF* you requested a return of contributions due to an excess contribution and the excess was removed before the extended due date of the 2020 tax return and the earnings were also returned and you know that the IRA custodian will report this as a return of contribution and not as a normal IRA distribution - then:
You can just report it now and ignore the 2021 1099-R when it comes unless there is Box 4 Federal Tax withholding and/or box 12 State withholding. Then you must also enter the 2021 1099-R into the 2021 tax return since the withholding is reported in the year that the tax was withheld. The 2021 code P will not do anything in 2021 but the withholding will be applied to 2021.
You would enter the 2021 1099-R with the total distribution in box 1 (contribution plus the earnings),
The earnings in box 2a,
Check the IRA/SEP/SIMPLE box.
Enter code "P" in box 7 - don t worry that it will say "taxable in 2019 "
Enter code "1" in box 7 if under age 59 1/2 (lower box 7).
On the "Which year" screen say that this is a 2021 1099-R.
After the 1099-R summary screen press continue.
Enter the explanation for the excess contribution and that you are reporting a 2021 1099-R on your 2020 tax return to avoid having to amend in 2021.
The box 2a earnings will be taxable income reported on line 4b on the 1040 form and if under age 59 1/2 will also be subject to a 10% penalty on a 5329 form.
[EDITED to change years for 2020]
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
