Remove the excess contribution and any earnings before you file your 2019 tax return.
On your 2019 tax return to account for the earnings follow the instructions below.
Under Federal Taxes- Wages and Income- Retirement Plans and Social Security- 1099-R:
- Find the custodian's address and EIN (should be easy for large institutions)
- Box 1- the total amount that came out, including the earnings
- Box 2a- the taxable earnings
- Box-7 Enter Code P (and Code J if under 59 1/2).
- After entering the 1099-R, you will be asked for the year of the tax form. You would select 2021. (Code P means taxable in the year before the form.)
This accounts for any earnings on your 2019 so you do not need to amend it after you receive the 1099-R for 2020.
You do not want to enter the amount of the excess contribution into TurboTax if you remove it before you file your return. Then the program will not charge a penalty for excess contribution.
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