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Since your excess contribution is being corrected, you will not report the excess contribution at all. Only uncorrected excess contributions are subject to the excise penalty. If and when you enter the Roth contribution within the program, you will be instructed to take out the money and remove the entry from Roth contributions.
Now, you need to wait on the custodian to calculate the earnings attributable to this excess contribution, as you will be withdrawing $6500 plus earnings. You need to pay tax on these earnings in 2016, although you won't get the 1099-R for this until next year. Although the 1099-R comes in 2018, the taxable event is in 2016. You should account for your earnings now by inputting a "mock" tax form now:
You will type a brief statement explaining your excess contribution and how the earnings got calculated.
Next year, you'll get a 1099-R with Code P on it. Code P will mean taxable in 2016. And you will already have accounted for that on your 2016 return.
Since your excess contribution is being corrected, you will not report the excess contribution at all. Only uncorrected excess contributions are subject to the excise penalty. If and when you enter the Roth contribution within the program, you will be instructed to take out the money and remove the entry from Roth contributions.
Now, you need to wait on the custodian to calculate the earnings attributable to this excess contribution, as you will be withdrawing $6500 plus earnings. You need to pay tax on these earnings in 2016, although you won't get the 1099-R for this until next year. Although the 1099-R comes in 2018, the taxable event is in 2016. You should account for your earnings now by inputting a "mock" tax form now:
You will type a brief statement explaining your excess contribution and how the earnings got calculated.
Next year, you'll get a 1099-R with Code P on it. Code P will mean taxable in 2016. And you will already have accounted for that on your 2016 return.
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