My situation is a little complicated... So when I was filing 2020 tax, I just learned that I had 6k in Roth and 6k in IRA. Without researching on the procedure, I simply withdrew 6k directly from IRA. Then on the 2020 tax filing, I reported 6k for Roth and 0 for IRA . I thought it was alright since I was just taking after-tax cash deposit out to an after-tax account within a month. Now for the 2021 filing, I got a 1099-R saying that I had an early distribution of 6k from IRA. I already have 5k currently in Roth. I am under 59 1/2 years old.
So in clear summary, this is the situation now:
2020 - Roth: 6k, IRA: 6k
2021 - Roth: 5k, IRA: 1k
2022 - Roth: 2k, IRA: 0
>> withdraw 6k from IRA in 2021directly without specifying from year 2020
My questions are:
1. What is the best way to file this with the least penalty?
2. Do I have to amend 2020?
3. Would the rollover be an option for me?
4. I actually called the bank to take out 1k from Roth for 2021 for excess contribution...but I saw that my 5498 form is still showing 6k the original contribution. Is that a mistake?
Many thanks!
I am going to provide what happened next myself in case someone else is in the same situation as mine. So I reached out my IRA bank, and they suggested me to file a request to recode the 1099-R. I ended up filing two, one for 2020 and one for 2021. And I ended up getting an approval and I got two 1099-Rs back.
1099-R #1:
box 1 = 5600
box 2a = 0
box 7 = "8" (Excess contributions plus earnings/excess deferrals (and/or earnings) taxable in 2021), "1" (Early distribution with no known exception)
1099-R #2:
box 1 = 200
box 2a = 200
box 7 = "1"
So the amount here reflects my contribution + earnings in each calender year instead of tax year. Both 1099-Rs are dated 2021. So since I lost money I didn't owe any tax in capital gain.
So my questions are:
1. Do I need to amend 2020? Since I put $0 for contribution to IRA thinking I would just withdraw the excess afterwards.
2. If I need to amend 2020 tax return, how do I file so that turbo tax doesn't see my contribution to Roth as the excess?
2. Do I file both 1099-R for tax year 2021?