Yes, that is correct. You will owe regular income tax on the earnings portion. But you won't get the 1099-R until next year. Enter the earnings portion on this year's tax return, however, so you do not have to amend it later. Then, when you get the 1099-R next year, you won't need to file an amended return.
You can enter the 1099-R that you will receive next year on this year's tax return, which will report the earnings income this year. The IRA custodian won't send you the code JP 2021 Form 1099-R until near the end of January 2022. You can enter it now to report this on your 2020 tax return as if you have already received Form 1099-R.
- Box 1 = total received back
- Box 2a = earnings portion
- Box 7 = codes J and P
In the follow-up, indicate that this is a 2021 Form 1099-R. On Form 1040, TurboTax will include the excess contributions on line 4a, the earnings on line 4b, and will include an early-distribution penalty (10%) on the earnings on Form 5329, if you are under 59.5.
The Code P drop-down will say ''earnings/excess deferrals taxable in 2019'' but it means taxable in the previous year which is appropriate in your situation since this is a 2021 Form you are entering. Code P of a 2021 Form 1099-R will be taxable in 2020. If you enter the form next year, it won't be taxable on your 2021 tax return, but you can ignore the message to amend your 2020 return as you will have already reported the earnings and penalty if applicable. @mmihuc
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