2020 Roth IRA Profit Pulled Out In 2021

[positivewave]

While working on my 2020 taxes, TurboTax let me know I contributed too much to my Roth IRA in 2020.  I pulled out the excess 2020 contribution in February 2021.  At the same time, I also had to pull out the profit associated with that excess contribution.  I've been told that I need to declare that profit as income on my 2020 taxes.

My investment company says that there will be no 2020 1099-R document issued at this point since the money was taken out in 2021.  Without that, I'm not sure how I enter the investment profit as income in TurboTax.  I also believe I need to fill out form 5329 so the profit gets accessed the 10% early-withdraw penalty, but I'm not sure how to do that in TurboTax either.

[DanaB27 · Accepted solution]

Yes, the earnings will be subject to the 10% early-withdraw penalty.

You will get a 1099-R 2021 in 2022 with codes P and J. This 1099-R will have to be included on your 2020 tax return and you have two options: 

• You can wait until you receive the 1099-R 2021 in 2022 and amend your 2020 return or
• You can report it now in your 2020 return and ignore the 1099-R when it comes unless there is Box 4 Federal Tax withholding and/or box 14 State withholding. Then you must enter the 2021 1099-R into the 2021 tax return since the withholding is reported in the year that the tax was withheld. The 2021 code P will not do anything in 2021 tax return but the withholding will be applied to 2021.

To create a 1099-R in your 2020 return please follow the steps below:

1. Open your return 
2. Click on "Search" on the top right and type “1099-R”
3. Click on “Jump to 1099-R”
4. Select "I'll type it in myself"
5. Box 1 enter total distribution (contribution plus earning)
6. Box 2 enter the earnings
7. Box 7 enter P and J 
8. On the "Which year on Form 1099-R" screen say that this is a 2021 1099-R.