@USAFXXX wrote:
Total Roth contributions for 2020 were $1,900where I contributed $1,000 in 2020 and $900 in 2021. I have two earnings figures, one for $82.79 belonging to $1,000 and taxable in 2020 and $74.51 related to $900 and taxable in 2021. I need t way to disclose to IRA that I removed $1,900 in 2020 and report the $82.79 earnings for taxes and 10% penalty purposes.
You do not use a substitute because you do not have a defective 1099-R to substitute for.
This might require 1 or 2 1099-R's depending if the 2021 contribution was *for* 2021 or contributed in 2021 *for* 2020.
If both were for 2020 then use a single 1099-R as below.
If the 2021 contribution was *for* 2021 then that goes on your 2021 tax return next year.
Earnings are taxed in the tax year that the contribution was for, not the year returned, if different years.
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.*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 Roth distribution but as a return of contribution with a code "JP" in box 7 - then:
You can just report it now and ignore the 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 JP will not do anything in 2020 but the withholding will be applied to 2021.
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 2019 "
Enter code "J" in box 7 (Bottom).
On the "Which year" screen say that this is a 2020 1099-R. - That makes it taxable in 2020 and not 2019
After the 1099-R summary screen press continue.
If you are over 59 1/2 then on the "Lets see if we can lower your tax bill" enter the box 2a amount in the "Another Reason" box to eliminate the 10% early withdrawal penalty on the earnings.
Enter the explanation for the excess contribution and that you are reporting a 2021 1099-R on your 2019 tax return to avoid having to amend in 2020.
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 that will be reported on line 59 on the 1040 Schedule 4 form.
**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.**
