Question on whether our son needs to file income tax return for TY2020

CA087 — Fri, 26 Mar 2021 06:38:03 GMT

Our son is in college and would normally not need to file an income tax return for 2020, since he, as a dependent child on our return, doesn’t have earnings above $12400 and has no other source of income like interest or dividend.

We have a question on whether he needs to file a return in 2020, because we had an unexpected issue with his Roth IRA. He had a paid summer internship in 2020 at his university. He opened a Roth IRA in November 2020. However, we didn’t realize he’d would receive a 1098T instead of a W2 for the summer work. Our search show that PhD students (but he is not) could use that income on a 1098T for Roth IRA contribution. So, we have had to remove the “excess” contribution.

Timeline summary

Summer 2020: he had a paid internship at his university
Nov 2020: he opened a Roth IRA
Feb 2021: he received a 1098T, which means he had no eligible income for a Roth IRA
Mar 2021: brokerage processed his “removal of excess” form, which resulted in a) moving $6000 from TY2020 contribution to TY2021, b) a check mailed to him for balance above $6000 from investment gains since account opening in nov 2020.

Since the removal of excess form was processed in March of 2020, we were told by the brokerage phone agent that the 1099-R would not be generated until Jan of 2022. Is this correct? If correct, then it seems that he would not need to file a return for 2020, right?

Re: Question on whether our son needs to file income tax return for TY2020

Mike9241 — Fri, 26 Mar 2021 08:01:47 GMT

you are correct since the 2020 excess was removed before the filing deadline there is nothing to report.

you won't get a 1099-R for the removal of the excess until 2022 which will be for 2021 since that's the year you removed the excess and transferred the max from 2020 to 2021

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Question on whether our son needs to file income tax return for TY2020

Re: Question on whether our son needs to file income tax return for TY2020