Thank you so much for your expert answer! We REALLY appreciate it. The content is dense, I'm still digesting the answers.
We are filing a 2020 return for her now because of this excess contribution issue.
For year 2020, the contribution of $1,250 was made on 12/11/2020. It was pulled out on March 4, 2022 from Vanguard. Vanguard said they will only return $1,250. The earnings stay in her Roth IRA. We haven't received the 1099-R yet. You are right, TurboTax generated a Form 5329. Part IV, line 25 shows $75 Additional tax.
By the way - this $1,250 was an injury settlement payment from Chipotle's legal department. As far as we can tell, this $1,250 should NOT taxable income, right?
We are in California but we don't see anything in the California return about the 2.5% penalty. Her tax due shows $0 in TurboTax.
For year 2021 your answer is packed - we have to soak that one tonight and might come back to you tomorrow to get more help.
Thanks again for sharing your awesome knowledge.
