@sabasu wrote:
I am not eligible to make a Roth contribution to 2021 either. So, I pay the 6% penalty for 2021 again, w/o amending the the 2020 return. That is ok with me. But I did not understand the part where you say "If you withdraw the $7000 from 2020 during 2022 (which I did on 11th Jan 2022), it will be tax-free and it will make the 6% penalty go away for 2022." In 2022's (next year's) form 5329, don't I have to show the $7000 - oh....got it, I am removing it in 2022, so no more 6% penalty in 2022. But how will IRS know...the 1099-R that will be issued to me next year?
I have bothered you already. Feel free to answer otherwise it's ok, I owe you a million additional thanks!
Right, you will get a 1099-R on January 31, 2023, for the 2022 withdrawal. That won't be taxable income but it will go on your 2022 form 5329 to clear off the old penalty for excess contributions.
