1) Yes, if you didn't report the earnings by entering a 2024 Form 1099-R with code PJ on your original filed 2023 tax return then you will have to amend your 2023 tax return.
2) Yes, you will enter the 2024 Form 1099-R with code 8J on the 2024 return to report the earnings in box 2a.
3) Yes, you will also enter the 2024 Form 1099-R with code PJ on the 2024 return to get the taxes withheld applied to 2024. The 2024 code P will not add anything to your income in the 2024 tax return but the withholdings will be applied to 2024.
4) TurboTax is aware of this issue.
As a workaround you can enter first only Form 1099-R with code 8J:
- Click on the "Search" on the top right and type “1099-R”
- Click on “Jump to 1099-R”
- Enter Form 1099-R with code 8J
- On the "Here's your 1099-R info" screen click "Continue"
- Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings under "Corrective distributions made before the due date of the return".
- Explain the Return of Contribution
- Go back to the "Here's your 1099-R info" screen and add Form 1099-R with code PJ
- When you back on the "Here's your 1099-R info" screen go back to the Wages & Income screen by clicking on "Wages & Income" (on the left side in TurboTax Online or on the top in TurboTax Desktop).
You will have Form 5329 showing the exception 21 on line 2 to exclude the earnings from the 10% early withdrawal penalty.
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