Roth IRA Return of Excess

[momak73]

This time last year I thought it was a great idea to open and fund a Roth IRA and contribute $6000 for 2019 and $6000 for 2020. The catch is, I'm on disability and didn't have earned income. I was told by an advisor that I needed to get the money out of the Roth and initiate a Return of Excess with Fidelity. Before I could get it out, the securities had a $1200 gain. 
I was told I need to report this to the IRS on my 2020 taxes. How do I do this in Turbo Tax for this year, even though I won't get the 1099 until next year. 

[DanaB27]

Please follow these steps to create a 1099-R and enter the withdrawal of excess contribution and earnings:

1. Login to your TurboTax Account 
2. Click on "Search" on the top right 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.

Please be aware, that you will have to enter the 2019 contribution on your 2019 tax return and will have to pay the 6% excess contribution penalty since you did not withdraw the amount by the due date of the 2019 tax return. If you need to amend your 2019 return then please see How do I amend a 2019 return in TurboTax? Just enter the contribution in the IRA contribution section and TurboTax will calculate the penalty on Form 5329. 

For the 2019 contribution you will also have to pay the 6% penalty on your 2020 tax return since you did not withdraw the excess by December 31, 2020. TurboTax will ask if you had an prior year excess in the IRA contribution section and you will enter the 2019 contribution amount. TurboTax will calculate the penalty on Form 5329.

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “IRA contributions”
3. Click on “Jump to IRA contributions"
4. Select “Roth IRA”

You will not have to pay the 6% penalty for your 2020 contribution since you withdrew the excess amount plus earnings before the due date of your 2020 tax return.