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Kellystaxes
Returning Member

How to report1099R earning from excess contribution from 2020?

Hello,

I over contributed in 2020 for 2020 tax year. I withdrew after filling 2020 taxes but I did withdrew before the filing deadline. I received 1099R in Jan 2022, this year! I have a few questions if you can help answer them.

 

1] I understand the earning will be taxed but can I report this earning as a 2021 income since I actually didn't cash it or withdraw until May 2021? I am afraid if I amend my 2020 tax return, the gross income for 2020 will increase again and the whole "bad " cycle will start again, and amount needed withdrawing from Roth contribution for 2020 will need to recalculated.  This is a nightmare! Why do I have to report the earning receive mid year 2021 on 2020 tax return in this situation?  I also asked the investment company tax experts and they said the earning earned in 2021 should be treated as a 2021 income. I'm so confused.

 

2] I did  withdraw the excess amount after filing 2020 tax but I completed the withdrawal before the general 2021 filing deadline, I'm assuming I don't need to pay the 6% penalty?

 

3]how do I pay the 10% penalty on the earing part as a early withdraw penalty? I cannot get turbo tax to add this penalty to my 2021 tax return.

 

Thanks,

Kelly

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6 Replies

How to report1099R earning from excess contribution from 2020?


@Kellystaxes wrote:

Hello,

I over contributed in 2020 for 2020 tax year. I withdrew after filling 2020 taxes but I did withdrew before the filing deadline. I received 1099R in Jan 2022, this year! I have a few questions if you can help answer them.

 

1] I understand the earning will be taxed but can I report this earning as a 2021 income since I actually didn't cash it or withdraw until May 2021? I am afraid if I amend my 2020 tax return, the gross income for 2020 will increase again and the whole "bad " cycle will start again, and amount needed withdrawing from Roth contribution for 2020 will need to recalculated.  This is a nightmare! Why do I have to report the earning receive mid year 2021 on 2020 tax return in this situation?  I also asked the investment company tax experts and they said the earning earned in 2021 should be treated as a 2021 income. I'm so confused.

 

2] I did  withdraw the excess amount after filing 2020 tax but I completed the withdrawal before the general 2021 filing deadline, I'm assuming I don't need to pay the 6% penalty?

 

3]how do I pay the 10% penalty on the earing part as a early withdraw penalty? I cannot get turbo tax to add this penalty to my 2021 tax return.

 

Thanks,

Kelly


The earnings and 10% penalty can only be reported on your 2020 (or amended 2020 tax return) since it was a 2020 contribution even if returned in 2021.    

 

Your 2099-R should have a box 7 code of PJ with means taxable in 2020.   The box 2a amount should be the taxable earnings.  Since it was timely removed before the due date of the tax return there is not 6% penalty.

 

Don't get tax advice from an investment company - they are wrong.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
Kellystaxes
Returning Member

How to report1099R earning from excess contribution from 2020?

When we sell our stocks, the earnings are usually reported in the tax year the stock is sold. Why isn’t the earning on the contribution treated the same way? If an excess amount is taken out 6 years later, the person has to go back and amend the tax report filed 6 years ago? This doesn’t make sense.

 

Kellystaxes
Returning Member

How to report1099R earning from excess contribution from 2020?

Also the 1099 R says tax year 2021 1099 R. Should the filing year be consistent with the year printed on the form?

FangxiaL
Expert Alumni

How to report1099R earning from excess contribution from 2020?

@macuser_22 is correct. Do not report the 1099-R on your 2021 tax return, even if the 1099-R has 2021 printed on it. The earnings came from the prior year's excess contribution. Amend your 2020 tax return. 

 

How do I amend my 2020 return? 

 

@Kellystaxes

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Kellystaxes
Returning Member

How to report1099R earning from excess contribution from 2020?

Ok got it. So don’t even mention anything at all about the 2021 1099 R on my 2021 return? Just totally skip it for the current year and only report it on the amend for 2020?

How to report1099R earning from excess contribution from 2020?


@Kellystaxes wrote:

Ok got it. So don’t even mention anything at all about the 2021 1099 R on my 2021 return? Just totally skip it for the current year and only report it on the amend for 2020?


Correct if there is a code P in box 7. 

However, if there was any box 4 withholding (unusual but can happen) then the 1099-R must ALSO be entered in 2021. The returned contribution will be ignored by the software but the box 4 withholding will be applied to offset 2021 tax.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
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