Same Year Withdrawl of 2021 Traditional IRA Contribution

[harryarora]

I contributed $6000 to my traditional IRA account for the tax year 2021 in Feb'21.

Later in the year, I switched jobs, and at my new employer, I started a 401k plan. As I'm participating in an employer-sponsored retirement plan, I cannot deduct the contribution to IRA anymore from the taxable income for the year. Therefore, I want to reverse the $6000 contribution.

My understanding is that I can withdraw the same year contribution before the tax filing deadline i.e April 15, 2202. Along with the original contribution ($6000), any interest/earnings generated has to be withdrawn as well. And I have to show ONLY the interest/earnings as part of gross income while filing taxes and also pay a 10% penalty ONLY on the interest/earning generated and NOT on my original contribution ($6000). 

I want to confirm if my understanding is correct so that I can go ahead and perform the distribution. Thank you.

Reference: https://www.irs.gov/instructions/i5329#idm139986644641968 "Line 15" 

[rbynaker]

If you had an EXCESS contribution, that would be the case.  However, your contribution was not excess, it was merely NON-DEDUCTIBLE.  Not at all the same thing.  You can't do a corrective distribution just because it's non-deductible.

Leave it there and file the Form 8606 to start tracking basis.

[jeffmcpa2010]

You might be able to covert it to a Roth Contribution - check into information about a "back door roth".

Lot's of high earners do them on purpose. Make a non-deductable traditional IRA and right away convert to a roth.

I think it is still ok for 2021 but it is on "Brandon's" hit list in some of the 2022 tax bills under consideration.

[qbteachmt]

You seem to be lost on the internet.

You’ve come to a Peer User community for Intuit Income Tax Preparation products supporting tax preparation professionals using ProSeries, Proconnect and Lacerte Tax Preparation programs, and you may be looking for support as an individual taxpayer using TurboTax. Please visit the TurboTax Help site for support.

Your sign in user info here is the same one you can use over at the TurboTax forum.

Thanks.