Excess Roth IRA already reported last year
While doing 2020 taxes in 2021, I realized that we are over the income limit to contribute to a Roth IRA. I withdrew the excess contribution and its gains in 2021 and accounted for gains as taxable income in my 2021 taxes. This year, I received a 1099-R that show the distribution and taxable gains that I’m required to report. However, I have already done so already. How do I handle this? Do I need to redo my 2020 taxes? Can I ask Vanguard to correct the distribution as 2020 because that is what it is. I withdrew the excess before I filed my 2020 taxes, to avoid the penalty. I’m not sure what to do now. Please advise. Your help is greatly appreciated.
Permalink Submitted by Dan Zaehring on Mon, 2022-03-28 02:55
If you received the excess in 2021, then it is taxable in 2021, regardless of what year it was attributable to. If you included in your 2020 return, you would have to amend it.
Permalink Submitted by Alan - IRA critic on Mon, 2022-03-28 03:47
The 1099R will have a code in Box 7 that indicates the year in which the gains are taxable and possibly subject to penalty. The year will be the year IN WHICH (not for which) you made the contribution. So if you made the excess contribution in 2020, the 1099R should have Code P in Box 7. If it does, you will have to amend your 2020 return to report the gain and your 2021 return to delete the gain. There will also be another code indicating a penalty if you are under 59.5. Note that the 1099R has a key to explain the Box 7 codes on the reverse side. And if you use a tax program, the program should alert you if you try to report the gain in the incorrect year.