On 4/21/20 - $1500 were swept into my Vanguard Traditional IRA Acct. This was a mistake. I lost sight of the $1500 being unearned income thus making it an excess contribution.
On 4/22/20 - Vanguard directed me to submit a Vanguard ‘IRA & ESA Excess Contribution Removal Form’ for $1500, which I did. On 4/28/20 - this showed as $1500 sweep-out from my Vanguard Traditional IRA Acct.
On 1/15/21 - I received a 1099-R from Vanguard associated with the $1500 that was sweep-out from my on my Vanguard Traditional IRA Acct on 4/28/20. This 1099-R shows these values in its fields:
Box1 Gross Distribution = $1500; Box 2a = ‘blank’; Box2b = “X” ; Box 7 = “8”.
I presume that the IRS has a copy of the 1099-R in question and with it they will assume I own tax and possibly penalty based on the data it contains. I also presume that the IRS does not have any information showing that the 1099-R Gross distribution (box1) of $1500 represents removal of an excess IRA contribution.
My understanding is that I should not be taxed or penalized for the $1500 on the 1099-R Gross distribution (box1), which represents removal of an excess IRA contribution. Do you agree? If so, how do I communicate to the IRS through tax return forms that the 1099-R Gross distribution (box1) of $1500 should not be taxed because it represents a timely removal of an excess IRA contribution? How is this done with the TurboTax app ?
P.S. This would not be an issue/problem if 1099-R Box-2a = “0”. Unfortunately, Vanguard told me that they could not assume I did or did not own tax on the excess removal and therefore Box-2a was set to ‘blank’. I did not understand this reasoning and was ill-equipped to argue otherwise.
Thanks for your help & guidance.
