DianeW777
Expert Alumni

Retirement tax questions

Yes, that is correct to characterize the substitute 1099-R as though it is for 2020.

No. For your previous question, you will enter the correct SEP-IRA contribution you were allowed to make.  Do not include the amount you did withdraw timely.  By adding the 1099-R you are including the required interest/earnings amount on your 2020 tax return.

 

Excess withdrawn by April 15.

If the employee takes out the excess deferral by April 15, 2021, it isn't reported again by including it in the employee's gross income for 2021.

 

However, any income earned in 2020 on the excess deferral taken out is taxable in the tax year in which it is taken out. The distribution isn't subject to the additional 10% tax on early distributions. If the employee/self-employed takes out part of the excess deferral and the income on it, the distribution is treated as made proportionately from the excess deferral and the income. 

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"