Yes, I understand that you already withdrew an excess contribution and that the taxable earnings caused an increase of MAGI which triggered another excess contribution.
You will close your account with the request to withdraw the whole $4,000 as excess contribution plus earnings so the bank will code the 1099-R correctly to avoid having to pay the 6% penalty.
Then you will just amend your 2020 tax return when you get the 1099-R in 2022, pay the 10% penalty tax on the earnings and enter that you withdrew the whole contribution on the “You have a penalty” screen. Then you will be done with it for the future.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
