A 30 years old client made a Roth IRA contribution 6000 in 0815/2020 for the year 2020, later she found the error and withdrawn the contribution plus earning 500 in 01/15/2021, no forms issued.
I believe I only need to report the 500 as taxable as ordinary income, right? Where should I report, 1099-R input? and what code should I use? Thanks a lot!
IRS Pub 590a:
"How to treat withdrawn interest or other income.
You must include in your gross income the interest or other income that was earned on the excess contribution. Report it on your return for the year in which the excess contribution was made. Your withdrawal of interest or other income may be subject to an additional 10% tax on early distributions discussed in Pub. 590-B.
Form 1099-R.
You will receive Form 1099-R indicating the amount of the withdrawal. If the excess contribution was made in a previous tax year, the form will indicate the year in which the earnings are taxable.
Example.
Maria, age 35, made an excess contribution in 2019 of $1,000, which she withdrew by April 15, 2020, the due date of her return. At the same time, she also withdrew the $50 income that was earned on the $1,000. She must include the $50 in her gross income for 2019 (the year in which the excess contribution was made). She must also pay an additional tax of $5 (the 10% additional tax on early distributions because she isn’t yet 59½ years old), but she doesn’t have to report the excess contribution as income or pay the 6% excise tax. Maria receives a Form 1099-R showing that the earnings are taxable for 2019."
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