This has been an absolute headache with Vanguard. My wife contributed $500 in July 2023 and then another $3000 in February 2024 for the 2023 contribution year into her Roth IRA.
Given our current financial situation, we decided it was best to withdrawal the $3500 before the tax filing due date.
Reading page 30 of the IRS Pub 590b and the Secure 2.0 Act, it sounds like the 10% penalty has been waived where I only pay the income taxes on the $93.80 earnings.
The 1099-R will be mailed in January 2025 with a code of PJ. TurboTax says the P stands for the previous year return of contribution and the J stands for early distribution from a Roth IRA.
So if I apply this code next year then nothing happens in TT as I imagine I'm supposed to file the $93.80 earnings with the 2023 1040.
If I open up TT for 2023 and add a 1099-R along with code 8J where the 8 stands for Return of Contribution taxable in 2023 as well as the J then I'm properly taxed but also assessed a 10% early earnings penalty.
I'm guessing I add a 1099-R with only the 8 code but I technically did not receive a 1099-R and Vanguard says the J stays on there.
The alternative is not add anything this year and then amend the 2023 1040 next year but I'm trying to avoid doing this.
