I removed the excess IRA contribution before the penalty deadline and there was Fed. tax withholding even if there was no earnings, how to report the Fed. tax withheld?

[greenjeehan]

I made the excess traditional IRA contribution for 2019 in 2019 and removed it entirely in March 2020.  There was no earnings but loss from the removal. Even if there we no earnings, there was federal tax withholding. The relevant 2020 Form 1099 R will not available until January 2021. Should I report the federal tax withholding now in Box 4 of my made-up 1099 R for 2019 tax return?  Or should I leave Box 4 blank now for 2019 tax return and report the federal tax withholding next year for 2020 tax return?

[SusanY1]

The federal tax withholding will be tax withholding that applies to your 2020 tax return, so you will file the 2020 Form 1099-R in 2021.

[greenjeehan]

Thanks.  It is clear to me that I have to report 2020 Form 1099 R including the Fed. tax withholding for 2020 tax return.

I would like to check one more thing.  According to TurboTax, I still need to report a made-up 1099 R (indicating it is for 2020) with 2019 tax return in order to avoid amending the 2019 tax return later (and/or to inform the IRS of the removal).  So, I understand that I need to enter the gross distribution amount in Box 1 and zero (0) as no earnings in Box 2a of the made-up 1099 R now.  Do I need to enter also the Fed. tax withholding in Box 4 of the made-up 1099 R now, or just leave it blank now?

[dmertz]

Because the 2020 Form 1099-R reports tax withholding, the Form 1099-R must be entered into both 2019 TurboTax and 2020 TurboTax.  In 2019 TurboTax you can enter the box 4 amount or not; 2019 TurboTax knows to ignore box 4 of a 2020 Form 1099-R.  Just be sure that, when TurboTax asks in regard to the code P, you indicate that it's a 2020 Form 1099-R.

Because there are no taxable gains present in box 2a, the only effects on your 2019 tax return will be the inclusion of the box 1 amount on 2019 Form 1040 line 4a and the inclusion of your explanation statement for the return of contribution.  When reporting the same Form 1099-R again on your 2020 tax return by entering it into 2020 TurboTax, the only effect on your 2020 tax return will be the inclusion of the tax withholding on the tax-withholding line of 2020 Form 1040.

[dmertz]

On second thought. I would omit the box 4 amount when entering this into 2019 TurboTax.  By omitting the box 4 amount, TurboTax will not include the details of your made-up Form 1099-R in your e-filing; including the details is the equivalent of attaching the Form 1099-R to your mailed tax return.  Since the tax withholding is not being claimed on the 2019 tax return, no "attachment" of the Form 1099-R is needed on your 2019 tax return.