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"They are implying those earnings can remain in the account based on this last section and sentence because it is "After the due date of the return" as opposed to bullets 1 and 2 where you report the earnings."
The broker is only partially right. It's risky, though.
There is a strategy out there to go ahead and make this type of contribution knowing you will suffer the 6% excise tax, because there is the assumption you will make more than this in the earnings of that account, which will be tax free earnings.
"Hence, the excess Roth IRA contribution strategy is based on the notion that paying a 6% tax on excess contributions to a Roth IRA, while gaining the tax advantage of having the earnings from the excess contribution remain in the Roth IRA so it can grow tax-free, is a great deal compared to making the same investment with personal funds and having to pay income tax on the earnings and gains."
The IRS reference: https://www.irs.gov/publications/p590a#en_US_2021_publink1000231025
"I maintain that the earnings on that withdrawn contr are taxable in 2019 (as I understand IRS instructions) and are subject to the 10% withdrawal penalty."
There is no early withdrawal penalty unless there is a withdrawal.
Nothing was withdrawn in 2019 or 2020, and the earnings still have not been withdrawn, it seems. Anything withdrawn will be part of the 1099-R year of that event. You stated that in 2021 the $6k in, is what was removed. When there is a distribution, then if early distribution (not 59 1/2, or not meeting one of the 5 year rules) penalty applies, that will be in the tax year the earnings are removed.
"because of that sentence in the HR Block link I sent."
Sent where? This is a Topic on an internet community discussion forum; you might be getting email, because you might have set your profile to flag you with a notification that the topic has been updated. Using your web browser, come to your topic, here:
I think you are referring to:
https://www.fool.com/retirement/plans/roth-ira/excess-contribution/
“Withdraw the excess the following year
Another option for those who didn't correct their mistake before the tax deadline in the year they made an excess contribution is to withdraw it next year. If you do this, you have to take out only the contribution, not any earnings. You'll pay the 6% excise tax for the year you left the excess contribution in your account, but you won't have to worry about this tax in future years.
The government charges you ordinary income tax when you withdraw these excess contributions, even though you already paid taxes on this income the year you earned it. It'll also charge you a 10% early withdrawal penalty if you're under 59 1/2, so this isn't always an affordable way to fix your problem.”
"to relieve the excess contr which was all basis being roth"
But that corrective deadline has been missed. Try this: https://www.thetaxadviser.com/issues/2020/apr/correcting-excess-contributions-iras.html
From the part that is "Ordinary distributions from Roth IRAs" about 2/3 down.
And another IRS reference: https://www.irs.gov/pub/irs-pdf/i5329.pdf
Part IV.
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