Excess Contribution Roth IRA (2020 Tax Year)

[Mataiman]

My AGI for both myself and spouse is over the limit and we have both contributed $6000 in Fidelity Roth IRA accounts for 2020 and are not eligible for contribution at all given large influx of bonus at  end of year.  We have requested to withdraw contributions for 2020 (with earnings) to our bank account and have received confirmation letter from Fidelity at this time.  The letter indicates the amount of earnings as well as 6K contribution with total amount for both accounts.

My question is how do I report this on my 2020 tax return before receiving a 1099-R in January 2022 as indicated by Fidelity?  I want to avoid filing an amended return after receiving this 1099-R (in 2022) and want to make sure that I correctly add earning details into TurboTax to report this gain for the 2020 tax year.  I am NOT over 59 1/2 so am expecting the 10% penalty on earnings for this year... just not sure how to report it correctly in TurboTax.

Also, are there any additional forms (IRS Form 5329, etc.) that need to be filled out outside of prompts within the tax software I need to be aware of as I work to report this transaction in 2020?

I have seen similar postings in forum, but want to make of the correct process.

Thanks!

[ThomasM125]

You should enter a Substitute form 1099-R on your 2020 return. You will see an option for this when you see the screen Tell us Which 1099-R You Have. 

Enter in box 1 the distribution amount. In box 2 enter the earnings. Enter code "P" in box 7. Work through the questions in TurboTax after you entered the 1099-R until you see a question regarding why you made the distribution, to which you will respond it was a return of an excess contribution.

I don't know of any additional forms you have to enter.

[Mataiman]

Is it code P & code J in Box 7 for this response.  Seems a little confusing as code P references 2019 year.

[DanaB27 · Accepted solution]

Yes, you are correct it should be code P and J in box 7. After you enter the information on the 1099-R screen you click continue to select the year on your 1099-R (step 10 below). When you select 2021, then TurboTax will know that code P means "Return of contribution taxable in 2020".

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

1. Login to your TurboTax Account 
2. Click on the Search box on the top and type “1099-R”
3. Click on “Jump to 1099-R”
4. Answer "Yes" to "Did you get a 1099-R in 2020?"
5. Select "I'll type it in myself"
6. Box 1 enter total distribution (contribution plus earning)
7. Box 2a enter the earnings
8. Box 7 enter P and J 
9. Click "Continue"
10. On the "Which year on Form 1099-R" screen say that this is a 2021 1099-R.