2020 excess Roth contribution of $5,000 which earned $1,000. What should get reported on the 2020 return and 2021 if any? How setting up backdoor Roth

[sjrcpa]

If they've got a $5,000 excess ROTH contribution they went in thru the front door, not the back.

Reply and give more details about what they did when.

[qbteachmt]

Was the amount of excess removed before the tax return for 2020 was filed? If so, the contribution is as if it was never made.

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.

If it wasn't removed in time to be disregarded, then you have the penalty on the excess for 2020 and 2021 and the earnings as taxable income. You will owe the IRS 6% excise tax for every year the excess remains in the IRA.

Backdoor Roth means you are attempting a nontaxable conversion.

You contribute a Nondeductible amount to a Traditional IRA. You have no tax deferred or pre-tax amounts in any Trad IRA (or similar account per the IRS pub); you can have only this and any other funds as Basis (already taxed). That's because the move to Roth is "conversion" and it isn't taxable as long as the Trad funds were already taxed and not deducted and there are no Earnings in the Sheltered/deferred account(s). The timeliness is what makes it Backdoor = no time to earn anything that needs to be Taxed and nothing ever put in tax deferred.

If anything tax deferred is in any of these types of accounts, then taking any funds from any of them as conversion to Roth triggers pro-rata taxes.

It's not a special rollover. It's a special Condition for that rollover.