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Steps 3 and 6 Yes, you can request the return of a $130 2024 contribution plus earnings and then apply the $130 2023 excess contribution as a 2024 contribution. You should show $130 on line 19 of the 2024 Form 5329. Lines 20 and 22-25 will be empty/$0. You will not have the 6% penalty on your 2024 return, but the earnings will be taxable in 2024.
The earnings from the returned 2024 contribution will be taxable in 2024. If you are in the phaseout range for Roth IRA contributions this could cause another excess contribution. You should get a 2025 Form 1099-R with codes P and J if you request the return of the 2024 contribution plus earnings.
You will enter $6,870 as Roth IRA contribution for 2024 in the IRA contribution interview ($7,000 - $130 that you withdrew by the due date).
Or a simpler way, you can take a regular distribution of $130 without earnings in 2025 and pay the 6% penalty again on your 2024 return since the 2023 excess wasn't removed by December 31, 2024. You will get a 2025 Form 1099-R with code J in 2026 and when you enter it on your 2025 return it will resolve the excess contribution.
Yes, all the steps are correct for your spouse.
[Edited 4/12/2025 | 3:20 am PST]
@pbartoli
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