The 2021 Form 1099-R with codes P and J needs to be reported on your 2020 tax return since earnings ae taxable in the year the contribution was made for. If you entered it on your 2021 tax return TurboTax should have gave you a message that you might need to amend your 2020 tax return.
Please be aware, if you had tax withholdings then you must enter the Form 1099-R with codes PJ on your 2020 and 2021 tax return. It must be entered on the 2021 tax return to apply the taxes withheld to 2021. The 2021 code P will not do anything to the 2021 tax return but the withholdings will be applied to 2021.
Yes, you do not have to pay the 6% penalty in 2020 or 2021 since your withdrew the excess plus gains before the 2020 tax return due date. It seems the excess contribution got carried over to 2021. You might want to check your 2020 tax return if the 6% penalty got calculated on Form 5329. If yes, then please go to the IRA contribution interview and enter the excess contribution amount on the penalty screen as withdrawn before the due date.
To remove the excess contribution on your 2021 tax return:
- Click on "Search" on the top right and type “IRA contributions”
- Click on “Jump to IRA contributions"
- Select “Roth IRA”
- On the "Do you have any Excess Roth Contributions" answer "Yes"
- On the "Enter Excess Contributions" screen delete the amount that was carried over.
@DanRC
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