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Retirement tax questions
Yes you will receive a 1099-R from the financial institution once you withdraw the excess contribution. The 1099-R for the withdrawal will have the year 2021 on it since you did not withdraw the funds until 2021.
If you withdrew the excess contribution in 2021 and you have not yet filed your tax return, you can report the withdrawal so you are not charged the 6% penalty for 2021.
To report the withdrawal you create a substitute 1099-R
- You would enter the 1099-R with the total distribution in box 1 (the contribution plus the earnings),
- The earnings in box 2a,
- Enter code "P" in box 7 (Top) - don t worry that it will say "taxable in 2016 "
- Enter code "J" in box 7 (Bottom).
- On the "Which year" screen say that this is a 2020 1099-R.
March 15, 2021
12:04 PM