How to report Roth earnings after early withdrawal of all 2020 contributions?

[roshak]

While doing my taxes this year I discovered I was barely over the MAGI limit for making Roth contributions during 2020.  I withdrew all $5500 contributions for 2020 and moved them to my taxable account.  I am left with $1089 of earnings that I assume need to accounted for, taxed, and likely penalized.  How and where do I report this figure?  My financial institution's rep said I should file form 5329 for the 2020 earning and that I would not be receiving any tax forms from them until next year (which would not need to be filed because I will have taken care of it this year).

I am struggling to see where to enter this information or what question to answer that correctly accounts for that $1089 earnings.  Any guidance would be greatly appreciated. 

[DaveF1006]

You can file a substitute 1099-R to report the earning.  I would suggest reporting the withdrawal of the excess contribution on your 2020 return in the following manner.

1. Open (continue) return if you don't already have it open.
2. Inside TurboTax, search for 1099-R and select the Jump to link in the search results.
3. Answer Yes on the Your 1099-R screen,
4. Click on the box that you are creating a substitute 1099-R
5. Then select Continue.
6. in order to create a substitute 1099-R, you will need to obtain and name, address, and payer TIN as required so you can record the information properly on the form. You may need to contact Fidelity for this information or perhaps you can get information from their website.. 

The codes you will need for box 7 are J and P. Since this is a Roth IRA the only amount that is taxable are any earnings on the excess contribution. 

You will receive a 1099-R for the withdrawal in 2021 you do not need to report the information since you have reported it on your 2020 tax return.

[roshak]

Vanguard advised that I would need to file form 5329.  I don't see that anywhere?  Am I missing something?

[DaveF1006]

A 5329 will be generated by the process that I described above only if there is an early withdrawal penalty or if you have an RMD requirement.  How old are you?

[roshak]

Early 40's.   I unexpectedly hit the MAGI limit and all of my 2020 roth contributions were ineligible and thus had to withdraw and move them to taxable account.  Vanguard said the withdrawal 1099-R would come next year so I just want to make sure I'm not going to make things more confusing or difficult in future.

[DaveF1006]

You can report it this year or next. if you wish to report it this year, you will need to create a substitute 1099-R.

1. Open (continue) return if you don't already have it open.
2. Inside TurboTax, search for 1099-R and select the Jump to link in the search results.
3. Answer Yes on the first screen
4. next screen choose I will choose to enter my form.
5. Next screen asks how you will like to enter this, indicate you will type it in your self.
6. Next screen say its for you. Next screen indicate it's from a Financial institution>continue
7. Next is where you enter information. 
8. in order to create a substitute 1099-R, you will need to obtain and name, address, and payer TIN as required so you can record the information properly on the form. Make sure you check the IRA/SIMPLE/SEP box. 
9. Enter Code J as the distribution code in Box 12.
10. In he next few screens, it will ask what did with the money, indicate that you performed a rollover into another retirement account.
11. The next screen is where you will check that you are creating a substitute 1099-R
12. You will navigate and answer questions in the next few screens but you eventually come to a Substitute 1099-R agreement>continue\
13. Then you will enter an explanation for this substitute 1099R. indicate you that you returned an excess contribution.