Fantastic!! You are a true Champ! Thanks for your detailed explanation. I tried to digest it and below are my conclusions. I will be grateful if you could kindly confirm my understanding to your answer.
- First paragraph of your answer – Yes, I confirm that I was subject to the 6% penalty on my excess contributions of my Roth IRA of $7000 = $420 in my 2020 tax return. This amount was reflected in line 25 of form 5329 of 2020.
- Second paragraph of your answer - The excess contribution of $7000 is still in my account on 12/31/2021. So, to avoid the 6% penalty in 2021 taxes again, I will need to amend the 2020 return first, BEFORE filing my 2021 taxes. So, per you no 1099-R will be issued (even though my brokerage said a 1099-R MAY be issued in April of 2023).
- Third paragraph of your response – Withdrawal of earnings on my excess contributions in 2020 is not required. [BTW, is this called ‘true excess’ as I read in other places]
- Fourth paragraph of your response – My Roth IRA account is less than 5 years old. In that case do I need to calculate and withdraw the NIA (earnings) on my excess contribution in 2020 and include the earnings as income in my amended return for 2020. But will they attract a 10% early withdrawal penalty? On the earnings only or earnings + the return of my excess contributions?
So, net-net, I will need to file an amended 2020 return, knock off the excess contribution and the penalty and then file my 2021 taxes. No 1099-R is required for this purpose. I was also thinking on similar lines of your response, but was thrown off on the 1099-R part and the additional penalty part. Right?
Once again, thanks a million!
