If the excess contribution relates to the current tax year (2016), you don't show that you removed the contribution per se. In the IRA contribution area, you would simply back out the contribution altogether so the excess penalty goes away. You would only leave the contribution there if you failed to remove it.
Next year, you will receive a 1099-R that relates to your 2016 return. On this 1099-R, any earnings on this withdrawn contribution will be reported as taxable. I would recommend that you "fake it" this year, so you don't owe any interest/ penalties due to amending your return months down the road.
Under Federal Taxes- Wages and Income- Retirement Plans and Social Security- 1099-R:
- Find the custodian's address and EIN (should be easy for large institutions)
- Box 1- the total amount that came out, including the earnings
- Box 2a- the taxable earnings
- Box-7 Enter Code P (and Code J if under 59 1/2).
- After entering the 1099-R, you will be asked for the year of the tax form. You would select 2017. (Code P means taxable in the year before the form.)
If you made the correction in 2016 itself, you should already have a 1099-R, but it would have Code 8 instead of P.
Assuming you made the correction in 2017, you'll get a 1099-R with Code P on it next year. Code P will mean taxable in 2016. And you will already have accounted for that.
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