Mistakenly Made Excess Contribution to IRA

[curlytwotoes]

I mistakenly contributed an excess $1000 to my Traditional IRA in April 2025 prior to filing my 2024 taxes. Prior to this mistake, I had already contributed the maximum amount in 2024 of $7000 to my Roth IRA. The excess contribution was supposed to be a contribution to 2025 tax year but somehow got filed as a 2024 contribution.  So in reality, I ended up contributing $8000 ($1000 Traditional + $7000 Roth) for 2024. To further the issue, I already contributed $7000 (maximum amount) to my IRAs for 2025.

How do I rectify this problem? Essentially, I'd like to withdraw the $1000 but I don't think I can do that because it was for 2024 and I already filed my taxes. Can someone help? Do I need to amend my 2024 taxes? Any help would be great. Thank you.

[fanfare]

If you filed by April 15 aka timely or requested an extension, you can still remove a 2024 excess contribution and its earnings until Oct 15 2025. you would then amend your 2024 tax return if the earnings are positive.

@curlytwotoes 

[curlytwotoes]

I talked to my investment broker. They said I can't remove the excess contribution because I had converted it from a Traditional IRA to a Roth IRA (part of a backdoor Roth IRA contribution). So pretty much they said I'm SOL. Any suggestions on what I can do?

[fanfare]

[Removed]

@curlytwotoes 

[fanfare]

Oops sorry. I posted to the wrong thread.

[fanfare]

An excess contribution to an IRA converted to Roth IRA becomes an excess contribution to a Roth IRA.

In the year of conversion, you would file Form 5329 Part III and  Part IV, and in later years Form 5329 Part IV.

An after-return-due-date excess contribution is resolved by having the custodian give you a straight distribution of $1000 from your Roth IRA.

Therefore, wait until Oct 16, 2025 to take out the $1,000.

You will pay one year's penalty on an amended 2024 tax return.

@curlytwotoes 

[Opus 17]

For 2024, you need to report an excess contribution of $1000 to a Roth IRA and pay the 6% penalty.

For 2025, you can remove $1000 of your current year IRA contributions, tell the custodian to process a removal of excess contributions.  They will also send you the net attributed income, which will be taxable on your 2025 return (they will send a 1099-R).  Then the 2024 excess will get used up in the 2025 limit. 

Or you can withdraw $1000 from the Roth IRA as a regular withdrawal.  It won't be taxable as long as it represents a return of contributions (you have not already withdrawn all your contributions).   By withdrawing that $1000, the excess will be cleared off the form 5329 for 2025 when you file your return. 

[fanfare]

"tell the custodian to process a removal of excess contributions. "

@Opus 17 

The custodian just told the owner that they would not do that.

[Opus 17]

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@fanfare wrote:

"tell the custodian to process a removal of excess contributions. "

@Opus 17 

The custodian just told the owner that they would not do that.

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The custodian can't process a return of excess for the 2024 contribution to an IRA because it has since been converted to a Roth IRA.  The taxpayer can't remove the 2024 excess and has to pay the 6% penalty.  That's a closed issue. 

What I am talking about is that, to remove the excess in 2025, the taxpayer could remove part of their 2025 contributions.  I agree that, if the 2025 contributions have also been converted from a traditional to a Roth IRA, the custodian may be unable to process a return of excess, but it was not clearly explained if that had also happened.   In that case, the taxpayer can still clear the excess by making a regular withdrawal from the Roth IRA. 

[curlytwotoes]

@Opus 17 Correct, the 2025 contributions have already been converted from a Traditional IRA to a Roth IRA, which the custodian stated they would be unable to process the return of excess. And it seems like I'm stuck having to pay the 6% penalty for 2024.

So what it sounds like I need to do is:

1) Amend my 2024 taxes and fill out the Form 5329 Part III and Part IV like @fanfare stated.

2) Clear the excess in 2025 by making a regular withdrawal of $1000 from my Roth IRA on or after October 16, 2025.

Does this sound right?

Also thank you both @fanfare and @Opus 17 for helping with this.

[Opus 17]

@curlytwotoes 

1. Correct.

2. The regular withdrawal of $1000 can be made any time between now and December 31.  It is not necessary to wait until after October 15.  Just remember to ask for a regular withdrawal, not a special withdrawal or return of excess.  

[fanfare]

Looking more carefully at Form 5329 for 2024, I think you can use Part III not Part IV, and not both.

You started with an excess in Traditional but now it is in Roth.

The resolution - Part IV - hasn't happened yet, so it does not apply.

In any case the Explanation will tell IRS what you did.

@curlytwotoes 

[Opus 17]

Wait wait wait wait wait just a minute.  Let me get this straight:

1. You contributed $7000 to a Roth IRA in 2024, or in 2025 for the 2024 tax year.

2. You contributed $1000 to a traditional IRA in April 2025 that was credited to tax year 2024.  Then, you converted the $1000 to the Roth IRA.

We've all missed the point.  Contact the Roth IRA and withdraw $1000 as an excess contribution, with the net attributable income, and report that on an amended 2024 tax return.  No penalty.

The fact is, you contributed $8000 to your combined IRAs when your limit was $7000.  You can assign the $1000 excess anywhere you want.  You can't remove the excess from the trad IRA because it was already converted, but if you contributed directly to the Roth IRA, you can the $1000 excess is part of the Roth contribution, and remove the excess from that account, using the special procedure for removal of excess contributions.  The net attributed income is taxable, but there is no penalty for early withdrawal and no penalty for excess contributions. 

In this case, you file an amended 2024 return.  Go to the section for retirement income and enter a substitute 1099-R for the removal of excess.  Box 1 is the total amount of the withdrawal, box 2a is the amount of taxable attributed income, and use codes P and J in box 7.  You will not need a form 5329 at all.  Include “Filed pursuant to section 301.9100-2” as part of your explanation for the amended return.  

Then you do not need to make a $1000 withdrawal during 2025. 

(If the entire $8000 for tax year 2024 was involved in conversions, this won't work, but if some of the money was a direct Roth contribution, you can remove the excess from there instead of the trad IRA.)

[curlytwotoes]

@Opus 17 & @fanfare To clear up any confusion, here's exactly what I did:

In 2024, I contributed $7000 to a Roth IRA, then recharacterized that amount to a Traditional IRA (because my income was too high), then converted it to a Roth IRA again to carry out the backdoor Roth IRA. 

In 2025, just before I filed my taxes for year 2024, I (mistakenly) contributed $1000 to my Traditional IRA for 2024 contribution year instead of the intended 2025 contribution year putting me at $8000 of IRA contributions for 2024.

I did not realize I did this until after I filed my 2024 taxes, which stated I only contributed $7000.

To compound the issue, before I realized I had contributed an excess $1000 to the 2024 contribution year, I already contributed the max $7000 using the backdoor Roth IRA method for 2025 contribution year. In other words, I contributed $7000 to my Traditional IRA then converted it to a Roth IRA for 2025 contribution year.

I contacted my brokerage firm, asked them to remove the excess $1000. They said they can't because I already converted it from Traditional to Roth. When I asked if there's anything else I can do to rectify the problem, they said they couldn't help and suggested I speak to people who know taxes.

Which leads me to where I am today. Hopefully, that clears up any confusion. Does this change anything from what you last posted?

P.S. Sorry for making this confusing as I probably should have stated this at the start.

[Opus 17]

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@curlytwotoes wrote:

@Opus 17 & @fanfare To clear up any confusion, here's exactly what I did:

In 2024, I contributed $7000 to a Roth IRA, then recharacterized that amount to a Traditional IRA (because my income was too high), then converted it to a Roth IRA again to carry out the backdoor Roth IRA. 

If the $7000 Roth and $1000 trad IRA contributions were both involved in this weird conversion dance, then we are back where we started.  You have an excess $1000 contribution for 2024 that must be reported on form 5329, and the 6% penalty paid (amended 2024 return).  Then, at some point during 2025, take a regular withdrawal of $1000 (no need to account for earnings) from the Roth IRA.  This will go on form 5329 on your 2025 return and zero out the carryover excess from 2024.  

The $1000 Roth withdrawal will not be subject to income tax on your 2025 return, but it could be subject to a 10% penalty for early withdrawal.  It will not be subject to the 10% penalty if you can meet one of three conditions. 

a) at some point in the past, you made at least $1000 of direct contributions (not conversions or backdoor conversions) to any Roth IRA account you own, and have not previously withdrawn it, or

b) if your only Roth money comes from conversions, you won't be subject to the 10% penalty as long as at least one of the conversions happened in 2021 or earlier, or

c) you are age 59-1/2 or older.

But unfortunately, if your only Roth money comes from conversions and you did not open your Roth until 2022 or after, then your $1000 withdrawal will fail the 5 year clock on conversions and be subject to the 10% penalty for early withdrawal.