Excess Roth IRA Contribution in 2021, Fixed in 2022, Impact on 2022 Tax Return

[gem23]

I contributed an excess amount to my Roth IRA in 2021.  Before filing my 2021 Tax Return in Feb 2022, I requested the excess contribution and earnings back from Vanguard.  My Roth IRA was opened well over 5 years ago and I was over age 59.5 in 2021.

When completing my 2021 Tax Return in Feb 2022, I entered the original amount of my contribution and then entered the amount of the excess contribution withdrawn before the due date of the tax return.  I did not have the amount of earnings at that time.

I understand that I need to amend my 2021 Tax Return to show the earnings.  I use Turbo Tax Deluxe CD/Download software. After reviewing TT Support, I have two questions:

• The 1099-R I received from Vanguard shows 2022.  On the 1099-R, Box 1. has the gross distribution including the excess contribution and earnings.  Box 7 has codes J, P.  No federal or state taxes were withheld.  Box 2a shows $0 (not blank).  Shouldn’t box 2a show the earnings (difference between gross distribution and excess contribution)?  If yes, then do I need to Vanguard for a corrected 1099-R?
• As it is the 1099-R is for Tax Year 2022, will the IRS matching software get upset if I don't enter anything on my 2022 Tax Return?  If I do need to enter it on my 2022 Tax Return, how do I avoid getting taxed a second time on the earnings?

[DanaB27 · Accepted solution]

Yes, box 2a should show earnings but if you didn't have any earnings it will show $0. Yes, you might want to check with your financial institution if you had earnings and if they need to correct your Form 1099-R.

No, you don't need to enter it on your 2022 tax return, and the IRS knows that the form belongs on your 2021 return because of the code P.