In 2020 I contributed to my Roth IRA, married, and then realized I would be ineligible to contribute to a Roth IRA as we intended to file taxes jointly and exceeded the income limit. In January 2021 I withdrew the 2020 contributions and interest, and received a 1099-R in January 2022 for tax year 2021. I entered this information on my most recent tax return. Do I have to do anything else for tax year 2020? I have received conflicting advice and am unsure.
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Yes, if your Form 1099-R has the code PJ then you will have to amend your 2020 tax return to report the distribution. Only the earnings will be taxable and subject to the 10% early withdrawal penalty if you are under 59 1/2.
Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2019" you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2020.
Just so I understand clearly, when I entered it on my 2021 return, was I not taxed on those earnings? And if not, was the 2021 entry just for informational purpose.
Yes, code P will not do anything to the 2021 tax return in regards to income but any tax withholdings will be applied to 2021.
A 2021 Form 1099-R with codes PJ belongs on the 2020 tax return.
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