Why will I be receiving a 1099-R in January of 2022, for income that is supposed to be reported for tax year 2020?
Why will I be receiving a 1099-R in January of 2022, for income that is supposed to be reported for tax year 2020?
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user19035 · External communityPost link
External question — Personal Finance Stack Exchange
Author: user19035
Original post: https://money.stackexchange.com/questions/137188
License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/
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I overcontributed to my Roth IRA by $2,000 in 2020. I realized this when working on my 2020 taxes this year, so withdrew the excess contribution and respective earnings of $277.50. Now I received a letter from my broker summarizing this transaction. The letter also says:
The amount of earnings returned to you, if any, will be reported as taxable income for the year in which the excess contribution was made. This transaction will be reported on IRS Form 1099-R, which will be mailed to you next January.
If the earnings are supposed to be reported on my 2020 taxes, why will I be getting the 1099-R next January?
I haven't filed my 2020 taxes yet. What should I do going forward?
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Aganju · External communityPost link
External answer — Personal Finance Stack Exchange
Author: Aganju
Original post: https://money.stackexchange.com/a/137191
License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/
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Although you withdrew your over-contribution, it made some gains. Those gains are automatically withdrawn too (so if you withdraw 100$, you might get a 101.57 $ check, for example); those gains are
taxable
income. They happened between your over-contribution and your withdrawal, and were
realized
when you asked for withdrawal - which is in 2021.
So you will have to pay taxes on those gains when you file for 2021 (which will be in 2022).
The over-contribution is corrected, and will reflect as such on your 1099-R for 2020. You only need to pay taxes for the gains, those will reflect on the 1099-R for 2021 - ignore them for this years's filing.
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Quoted from Forex.com.bd-Editorial External answer — Personal Finance Stack Exchange Author: Aganju Source score (net votes, not local likes): -1 Original post: https://money.stackexchange.com/a/137191 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. Although you withdrew your over-contribution, it made some gains. Those gains are automatically withdrawn too (so if you withdraw 100$, you might get a 101.57 $ check, for example); those gains are taxable income. They happened between your over-contribution and your withdrawal, and were realized when you asked for withdrawal - which is in 2021. So you will have to pay taxes on those gains when you file for 2021 (which will be in 2022). The over-contribution is corrected, and will reflect as such on your 1099-R for 2020. You only need to pay taxes for the gains, those will reflect on the 1099-R for 2021 - ignore them for this years's filing.
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