Withdrawal of contribution in 2024 from Roth IRA due to income limit

Forum|Forum|1 year ago
March 10, 2025
1 reply
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Hi there, I would greatly appreciate your advice for a follow-up question from my earlier post.

Context: I had made $7000 Roth IRA contributions for 2024 and 2025 without realizing that there is a income limit of $150,000. (for single). I submitted the form to Fidelity to return my $7000 contribution made to Roth IRA in Jan 2024 + $801.85 earnings = $7801.85 . (I will do the same after it gets processed to submit request for return of my contributions of $7000 made in Jan 2025 for my 2025 Roth IRA with loss of $86.).

1) Do I have to pay any penalties other than tax on the $801.85 earnings?

2) I entered 1099-R myself as in screen shot below, please confirm if the entries look right.

3) Please help me understand if MinhT meant that I would need to amend my 2023 tax return by his comment :"6. On your 2023 tax return, answer that the 1099-R with code PJ is for 2024." (My income was < $150k in 2023 and I had contributed $6500, so I thought that was ok for 2023 and I just need to fix 2024. ).

Screenshot 2025-03-10 at 10.53.13 AM.png

MinhT1

1. There is no penalty. You only pay income tax on the earnings of $801.65.

2. In entering the form 1099-R with code PJ on your 2024 tax return, indicate that the form 1099-R is for year 2025. See attached shot.

3. I have edited my previous answer to read: On your 2024 tax return, answer that the 1099-R with code PJ is for 2025.

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jackkganAuthor

Thanks a lot MinhT1! Your guidance has been extremely helpful!

One more small question on this topic

I placed a request through Fidelity for return of contribution + interest in 2024 on Friday evening. Order confirmation email had below:

Your excess contribution amount was $7000
Your total applicable earnings or loss for the computation period was $801.85
The total amount to be returned to you is $7801.85

I believe that it is expected to execute today after market closes and I guess the amount would be lower than the gains I had received in 2024 due to the market today. Please confirm if I have to sell more from my Roth IRA to make the returned amount to be $7801.85 or is it ok even if it sells for less or even loss now? Should I do anything further regarding this lower amount? Thank you.

DanaB27

No, you do not need to sell more if you have a loss associated with the return of excess contribution. In this case you will enter the distribution amount in box 1 and $0 in box 2a since you did not have any earnings with the return of excess contribution before the due date.

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