Withdrawal of ineligible contribution to Roth IRA due to income limit

Forum|Forum|1 year ago
March 10, 2025
1 reply
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Hi there, One more follow-up question:

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)

As per earlier suggestion, I called Fidelity and submitted the form 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 in 2025.). I hope I am on the right track now.

Questions:

1) I understand that I may have to pay taxes for the $801.85 earnings, but will I also have to pay any penalties? (I am 27 years old) . Would it be: IRS distribution - taxable = $802, IRS distributions -nontaxable = $7000?

2) Should I click Yes or No for below ? Because I did not exceed $7000, it's just that I did not realize that I was not eligible to contribute.

Screenshot 2025-03-10 at 9.03.13 AM.png

3) Is it ok to click No below as I did not withdraw before 2024 and only for the contribution made in 2024?

Screenshot 2025-03-10 at 9.06.42 AM.png

4) Please confirm if it is ok that I changed below to $0 as I am withdrawing this contribution

Screenshot 2025-03-10 at 9.08.33 AM.png

5) I clicked No for below as I think it is not a repayment.

Screenshot 2025-03-10 at 9.09.38 AM.png

6) Finally, please confirm what should I look for to ensure that I have entered everything properly.

Thanks a lot for your guidance!

Best answer by MinhT1

1. $802 earnings are taxable, $7,000 not taxable as they are withdrawals of Roth IRA contributions.

2.The answer should be No as you withdrew the excess contribution.

3. The answer is No

4. You should 0 as the excess contribution has been withdrawn.

5. The answer is No.

6. On your 2024 tax return, answer that the 1099-R with code PJ is for 2025.

[Edited 03/10/25 | 12:00 PM PST]

@jackkgan I have edited point 6 above.

MinhT1Answer

1. $802 earnings are taxable, $7,000 not taxable as they are withdrawals of Roth IRA contributions.

2.The answer should be No as you withdrew the excess contribution.

3. The answer is No

4. You should 0 as the excess contribution has been withdrawn.

5. The answer is No.

6. On your 2024 tax return, answer that the 1099-R with code PJ is for 2025.

[Edited 03/10/25 | 12:00 PM PST]

@jackkgan I have edited point 6 above.

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jackkganAuthor

Thanks so much again MinhT1

I just noticed the following sentence in your post. By any chance did you mean that I should amend my previous year 2023 tax return?

MinhT1 wrote: "On your 2023 tax return, answer that the 1099-R with code PJ is for 2024."

I entered 1099-R myself with the following entries for 2024, Please confirm if below are correct and if this what you meant by 2023? (I understand that though the drop down says 2023 , it would be for 2024 from a previous post)

Screenshot 2025-03-10 at 10.53.13 AM.png