I (married filing joint return) rolled over a 401k fund to an existing IRA in 2019. In 2020, the ex-employer informed me they mistakenly caused an excess contribution in the 401k a few years back (likely 2015). I withdrew the excess contribution plus the earnings (total of $528.11) from the IRA in 2020 resulting a 1099R showing $45.48 taxable amount for 2020. Would this require just the 1099R taxable entries for 2020 return or require amending past year return, in particular 2019 return as the TT program directs us? Amending 2019 return does not make sense as the withdrawal took place in 2020, not 2019. What’s the correct way to handle this?
You would have to amend the return for the year when the original excess contribution was made and every year after that during which the excess contribution was not corrected. Since you made the correction distribution in 2020, for the years of 2016 to 2019 you need to find out if you maxed out your pension plan contributions, and if so then you need to pay an excise tax on the excess contribution that was in the retirement account each of those years.