How to file 5329 for Roth IRA excessive contribution 2021

[hk88]

I contributed $3500 to Roth IRA in 2021 and now realize that I don't qualify because of total income exceeding the threshold. So, I withdrew the money [contribution($3500) + Earning ($130)] and put it in a brokerage account. I understand that I have to pay taxes on the earnings and have to report this to IRS. The challenge is that Vanguard told me that since I did the "distribution" (withdrawing) in 2022 - I'll get the 1099-R for 2022 in 2023 but the "contribution" was done in 2021 - I need to report this in my taxes now. 

Has anyone been in this situation? How do I do this?  

1) Where is the option to fill the 5329 form in turbotax? 

2) Do I pay any penalty on the earnings if I have already taken it out? If yes - where do I report that? 

[ThomasM125]

You would make an entry for a substitute form 1099-R and put the withdrawal amount in box 1 and the earnings in box 2(a). You will see an option to create a substitute form 1099-R on the screen that says Tell Us Which 1099-R You Have when you go to enter the form 1099-R. Code the substitute form 1099-R as "8" in box 7, for excess contributions plus earnings. 

You will get a 10% penalty on the income portion of the withdrawal if you are under age 59 1/2 when you made the withdrawal. TurboTax will calculate any penalty due automatically.

[hk88]

Thanks @ThomasM125 , Vanguard told me that 1099-R will only be generated next year (2023) since I did the transaction of withdrawing this year (2022). 

- Can you help me understand why do you think this will be the right approach - manually entering the 1099-R (in TurboTax online) while filing the taxes for 2021? 

This is what I did in the portal: 2021 Taxes-->Federal-->Wages & Income--> 1099-R--> and now it is asking me to import or manually enter info (including Payer, TIN, .. )-->(box1,2a,...) 

- Isthere is another way to "make an entry for a substitute form 1099-R"? 

[ThomasM125]

On the form 1099-R that you will receive next year, it will indicate that the earnings are taxable in 2021, since that is when they were earned. So, you will have to amend your 2021 return to add that income on the tax return you are preparing now. If you add it now, you won't need to amend it next year, so that will be less trouble for you.

When you go to enter the substitute 1099-R, you will choose the option I'll type it in myself on the screen that says Let Us Enter Your 1099-R. When you see the screen that says Tell Us Which 1099-R You Have, there is an option on the bottom of that screen that says I need to prepare a substitute 1099-R.