Question

If you took out an excess contribution to a Roth

Forum|Forum|1 year ago
March 1, 2025
1 reply
0 views

If you took out an excess contribution to a Roth before you filed for that year, is the problem solved once and for all? It's possible that this happened during the previous tax year, but likely older than that, but what's the answer either way? Fortunately, I doubt there were earnings from the excess contribution because I remember having them take the "correct" cash out, meaning it was cash added in addition to cash that was not yet invested at the time, in the Roth.

P.S If you made nearly a thousand for your earnings in cash and report that cash amount with your regaular earnings, but there's no digital footprint for it, will reporting it backfire in any way, besides possibly paying more in taxes?
Let me know how confident and qualified you are for your answers. Thanks!

TurboTax Home & Biz Windows

D

DanaB27

Yes, if you request the withdrawal of excess contributions plus earnings before the due date then the excess will be resolved and you do not have to pay the 6% penalty.

You will receive a 2025 Form 1099-R with code P and J to report the return of excess contribution made in 2024 withdrawn in 2025. This will have to be reported on your 2024 tax return. If you didn't have any earnings when withdrawing the excess contribution you will follow these steps to enter the 2025 Form 1099-R on your 2024 return:

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 2a enter the earnings of $0
Box 7 enter J and P
Click "Continue"
On "Is the IRA/SEP/SIMPLE box on this 1099-R checked?" screen answer "No, the box is blank"?
On the "Which year on Form 1099-R" screen say that this is a 2025 Form 1099-R.

If you earned income that was paid in cash, then you are still required to report it on your tax return. Please see How do I report cash income from self-employment?

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

T

taxrulerAuthor

The excess contribution was done in 2024 at the latest, but likely 2023, possibly in 2022. It was likely fixed before I filed in 2024 if not 2023. The brokerage with the Roth never mentioned anything about a 1099-R nor can I see “Jump to 1099-R” after I Click on the "Search" on the top right and type “1099-R”.

I don't recall any mention of a 1099-R during or after the excess was taken out of the Roth by the brokerage or Turbotax's "Review" thing.
Right now I've progressed in doing taxes for 2024, to being on "Personal" under "Deductions and Credits" and it hasn't come up yet. I even skipped to "review" and it was never brought up.

So what should I do?
What consequence, if anything, ever happens if I don't deal with the 1099-R thing?

P.S For any income gettin paid in cash, wouldn't I just enter it in the same place where I entered my other business income (which seems to be under "business" and "business income and expenses") and then click "edit" to type it in?
Thanks.

D

DanaB27

Generally, if you had excess contributions in earlier years then you will have to pay the 6% penalty for each year the excess stays in the Roth account. To remove an excess contribution after the due date you will take a regular distribution without the earnings.

You can check if your 2022 return has Form 5329 part IV showing an excess contribution and penalty. If not, then it seems you removed the excess contribution. You should have a 2023 Form 1099-R for the withdrawal. If it had codes PJ and earnings in box 2a then it should have been reported on your 2022 tax return and you should have the earnings listed on line 4b of Form 1040.

You can try these steps in TurboTax Online to get to the Form 1099-R entry if you request to withdraw the excess contribution for 2024 plus earnings before the due date:

Click "Wages & Income" (under Federal) on the left
Scroll down and click "Show more" next to "Retirement Plans and Social Security"
Scroll down and click "Start" next to "IRA, 401(k), Pension Plan (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 2a enter the earnings of $0
Box 7 enter J and P
Click "Continue"
On "Is the IRA/SEP/SIMPLE box on this 1099-R checked?" screen answer "No, the box is blank"?
On the "Which year on Form 1099-R" screen say that this is a 2025 Form 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" but you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2024.

If you don't have any earnings it won't be bad that you don't enter the Form 1099-R since you don't have any taxable income to report but TurboTax adds an explanation statement when you enter a Form 1099-R for the return of excess contribution which will get sent to the IRS with your return.

Yes, you would enter it with your other business income.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"