@tmiller1973 wrote:
Thank you for the clarification. Essentially I need to both withdraw the contributions and any earnings. The earnings will be taxed at my marginal income rate and there will be a 10% penalty.
If I take the distribution before April 15th of this year, will I need to account for this in 2023 filing or will it be for 2024 since we are past Jan 1st? As you mentioed before, I should have done this a week ago. So now I pay another 6% for 2024 and the 10% + income tax will be accounted for in 2024 tax year?
2024.
Remember as @dmertz clarified, a "return of excess contributions" can only be processed for current year excess. That is, if you contributed excess in 2023, you would have until April 15, 2024 to remove it. Since this excess is from 2020, you just ask for a regular withdrawal, and since it is a regular withdrawal that will occur in 2024, it gets reported on your 2024 tax return. And, since you have until December 31, 2024 to do this (it makes no difference when you take the withdrawal), you can take the time to make sure the 5329s for 2018, 2019, the amended return for 2020, and the 5329s for 2021, 2022 and 2023 are all handled correctly first. There is no benefit to rushing.
