Yes, you will have to amend your 2020 tax return to report the withdrawal of excess contribution plus earnings when you have a Form 1099-R with codes P and J. Only the earnings will be taxable. If you are under 59 1/2 you will have to pay the 10% early withdrawal penalty on the earnings. Please see How do I amend my 2020 return?
On you 2020 tax return:
- Login to your TurboTax Account
- Click on the "Search" on the top right and type “1099-R”
- Click on “Jump to 1099-R”
- Enter your 1099-R information
- Click "Continue"
- On the "Which year on Form 1099-R" screen say that this is a 2021 1099-R.
- Click "Continue" after all 1099-R are entered and answer all the questions.
- Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount under "Another reason" if you are over 59 1/2 (if you under 59 1/2 click "Continue")
Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2019" you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2020.
If you had any tax withholdings in box 4 and box 14 then you must enter the 2021 1099-R into the 2021 tax return since the withholding is reported in the year that the tax was withheld. The 2021 code P will not do anything in 2022 tax return but the withholding will be applied to 2021.
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