Hi DanaB27,
I removed a $7,000 excess 2020 Roth IRA contribution plus earnings on 1/4/21. I had Federal and state tax withheld. Your response to the original question in this thread was that the 2021 1099-R (which I will receive in 2022) must be reported in the 2021 tax return since the withholding is reported in the year that the tax was withheld. I am unclear as to what/when I should report on my 2020 and/or 2021 returns:
1) Should I report the $7,000 Roth IRA contribution on my 2020 return regardless of whether the removal of excess plus earnings is reported in the 2020 or 2021 return? Or should the 2020 contribution be reported in the same return as the removal of excess is reported?
2) Given that I had Federal and state tax withheld in 2021 for the 2020 contribution, am I able to report the return of excess contribution plus earnings on my 2020 return, calculate and pay my 2020 taxes due on the earnings as if no amounts were withheld for taxes, and then use the withholdings to offset taxes due on my 2021 tax returns?
3) Given that the withholding amounts are already known, if your suggestion is to report the removal of excess on my 2020 return, should I include the Federal withholding in Box 4 and the state withholding in Box 14?
4) If I can report the removal of excess in my 2020 return, should I or should I not select "I need to prepare a substitute 1099-R."?
5) If your advice is to wait until I prepare my 2021 tax return to report the removal of excess, would I then need to amend my 2020 tax return? If so, what steps would I need to perform in TurboTax to amend the return?
Thanks very much!
