@AmendedQuestioner
Great question!
How to treat withdrawn interest or other income
From IRS Pub 590a: You must include in your gross income the interest or other income that was earned on the excess contribution. Report it on your return for the year in which the excess contribution was made. Your withdrawal of interest or other income may be subject to an additional 10% tax on early distributions.
Form 1099-R
You will receive Form 1099-R indicating the amount of the withdrawal. If the excess contribution was made in a previous tax year, the form will indicate the year in which the earnings are taxable.
You can report it now in your 2022 return and ignore the 1099-R when it comes (unless there are federal or state withholdings).
To create a 1099-R in your 2022 return please follow the steps below:
- Login to your TurboTax Account
- Click on the "Search" on the top right and type “1099-R”
- Click on “Jump to 1099-R”
- Answer "Yes" to "Did you get a 1099-R in 2022?"
- Select "I'll type it in myself"
- Box 1 enter total distribution (contribution plus earning)
- Box 2a enter the earnings
- Box 7 enter J and P
- Click "Continue"
- On the "Which year on Form 1099-R" screen say that this is a 2022 1099-R.
- Click "Continue" after all 1099-R are entered and answer all the questions.
- Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount under "Another reason" if you are over 59 1/2 (if you under 59 1/2 click "Continue")
Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2021" you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2022.
Please also feel free to call in when you are preparing the amended return. Our experts are able to view your screen and offer Live Help.
Thank you!
