Withdrawing Excess Roth IRA Contribution

Forum|Forum|1 year ago
January 25, 2025
1 reply
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Hello and sorry, I am getting frustrated with the program but maybe it is my fault.

I have no earned income but I contributed 8k to a Roth IRA in January 2024. I now realize I cannot make any contribution.

I entered the Excess amount in TurboTax Deluxe and it calculated tax on this 8k in addition to money I withdrew from a Rollover IRA as spending money. I also indicated I was withdrawing that same excess 8k amount (will do it this year but before April 15, 2025). But it did not recalculate the tax I owe. What am I missing?

I believe I have to create a 1099-R to show the interest I made on that excess contribution so that this can be taxed?

Thank you very much.

Gerry

mglauner

If you indicated in TurboTax that you will withdraw your Excess Roth Contribution (plus earnings) before the tax filing date, you should not incur a penalty (or be taxed on that amount).

You can create a 1099-R to enter in TurboTax to report this, with Box 1 showing the amount of the Excess Contribution plus Earnings, and Box 2 showing only the Earnings amount.

In Box 7, use Codes P and J.

When asked What Year is your 1099-R, enter 2025.

Here's more info on Creating 1099-R to Report Excess Contribution and Earnings.

GM45Author

Thank you Marilyn!

1. I am 69-years old. Is the J code then correct for me as it says "Early Distribution ....". I also own the Roth account for more than 5 years.

2. I don't understand the P code here as is says now "Return of Contribution taxable in 2023". I made the contribution in 2024 and therefore the earnings on it too in 2024. So wouldn't the earnings be taxed in 2024?

Thanks again,

Gerry

DanaB27

1. Yes, for a return of an excess Roth IRA contribution plus earnings you need to use code code J with code P (IRS).

2. Yes, 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 made an excess contribution in 2024 and withdrew the 2024 excess Roth IRA contribution plus earnings in 2025 before the due date, then you will get a 2025 Form 1099-R in 2026 with codes P and J. This 1099-R will have to be included on your 2024 tax return and you have two options:

You can wait until you receive the 2025 Form 1099-R in 2026 and amend your 2024 return or
You can report it now in your 2024 return and ignore the 1099-R when it comes unless there is Box 4 Federal Tax withholding and/or Box 14 State withholding. Then you must enter the 2025 Form 1099-R into the 2025 tax return since the withholdings are reported in the year that the tax was withheld. The 2025 code P will not do anything to the 2025 tax return income but the withholdings will be applied to 2025.

To create a 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 2a enter the earnings
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".