Excess IRA contribution

Forum|Forum|1 year ago
March 19, 2025
1 reply
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In 2024 we inadvertently contributed too much to a SEP-IRA. I figured out the amount that was excess and worked to get that money pulled out. The rules state that if I fix the overage before filing my taxes I will not get penalized. So the position I am at now is that we have this corrected and we will receive interest from the money. I'm told I will get a 1099-R in January of 2026. How do I handle that in my tax return? I've changed the amount to the correct amount contributed but does the interest get taxed in 2024 or do I wait until 2025 taxes to claim that because we received it in 2025? Thanks.

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Best answer by DanaB27

The earnings are taxable in the year you made the contribution. Therefore if you made the contributions in 2014 then you must report the earnings on your 2024 return.

to enter the 2025 Form 1099-R in your 2024 return please follow the steps below:

Login to your TurboTax Account
Click on the "Search" on the top right and type “1099-R”
Click on “Jump to 1099-R”
Answer "Yes" to "Did you get a 1099-R in 2024?"
Select "I'll type it in myself"
Box 1 enter total distribution (contribution plus earning)
Box 2 enter the earnings
Box 7 enter P
Check the "IRA/ SEP/ SIMPLE" box
Click "Continue"
On the "Which year on Form 1099-R" screen say that this is a 2025 1099-R.
Click "Continue" after all 1099-R are entered and answer all the questions.
Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings under "Corrective distributions made before the due date of the return".

Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2023" you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2024.

DanaB27Answer

The earnings are taxable in the year you made the contribution. Therefore if you made the contributions in 2014 then you must report the earnings on your 2024 return.

to enter the 2025 Form 1099-R in your 2024 return please follow the steps below:

Login to your TurboTax Account
Click on the "Search" on the top right and type “1099-R”
Click on “Jump to 1099-R”
Answer "Yes" to "Did you get a 1099-R in 2024?"
Select "I'll type it in myself"
Box 1 enter total distribution (contribution plus earning)
Box 2 enter the earnings
Box 7 enter P
Check the "IRA/ SEP/ SIMPLE" box
Click "Continue"
On the "Which year on Form 1099-R" screen say that this is a 2025 1099-R.
Click "Continue" after all 1099-R are entered and answer all the questions.
Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings under "Corrective distributions made before the due date of the return".

Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2023" you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2024.

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