How to show removal of excess contribution to IRA

[natalinka25]

In 2020 I contributed 6K to an IRA and while I was doing taxes in March 2021 I find out I was to eligible for a tax deduction. At that point I also made $6K contribution for 2021. I decided to reach out to my broker and remove excess contributions for 2020 and 2021. It was done before April 15 2021. I did not have any forms in hand at that time, so I did not show anything on my 2020 tax return. I'm doing my taxes for 2021 now, have two forms 2022 1099-R from my broker. Both forms show gross distribution (example $5854 because of a loss in value) $0 for taxable amount. One form has distribution codes 1,8 and another 1, P. 

1. Should I ament my 2020 tax return and enter one of the forms there?

2. How do I show an excess removal in Turbotax. I entered forms in "Income" section and while it is not taxable my overall income is overstated by these two withdrawal amounts which is incorrect

3. How do I show a loss ($6000 originally contributed vs $5854 taken out)? 

[DanaB27]

1. Yes, you will have to amend your 2020 tax return and enter the 2021 Form 1099-R with codes 1 and P. Please see How do I amend my federal tax return for a prior year?

2. You will enter Form 1099-R with codes P and 1 on your 2020 return and Form 1099-R with codes 8 and 1 on your 2021 return. Yes, the full distribution will show on line 4a of your Form 1040 and on the Income summary (which shows gross income) and this is correct. Only the earnings will be taxable on line 4b and subject to the 10% early withdrawal penalty if you are under 59 1/2. You won't have to pay the 6% penalty. If you entered the contribution on your tax returns then you will enter on the penalty screen that you removed the full excess contribution amount (ignore losses and earnings here)

3. You cannot deduct the loss. 

[natalinka25]

Thank you! Do I also need to enter IRA contributions for the year on the deductions side? Do I enter 6K (what I contributed) or lesser amount that was actually withdrawn?

[DanaB27]

You will enter the full amount that you contributed and then enter on the penalty screen the contribution amount of $6,000 that you removed (ignore losses) by the due date. 

@natalinka25