When you removed the excess contribution you should have also removed any earnings on that excess contribution at the same time. This information would have had to come from the financial agent.
The earnings would have been taxable on your 2020 return (and a 10% penalty on that same amount if you were under 59 1/2 years of age). If you did not include that on your 2020 return then it should be amended to include the Form 1099R. Taxable amount should be earnings portion only.
When entering the information on the 2021 return you should see a code 'P' in Box 7 of your Form 1099R. This shows the IRS that the earnings are taxable in 2020 and lets TurboTax know it's not taxable in 2021.
- P – Excess contributions plus earnings/excess deferrals (and/or earnings) taxable in 2020
When you amend your 2020 return you will enter/add the Form 1099R as though you received it in 2020 and you will include only the earnings. For the 2020 return the code in Box 7 should be code '8'.
- 8—Excess contributions plus earnings/excess deferrals (and/or earnings) taxable in 2020
This will complete the returns correctly.
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