Yes, if you are in the phaseout range for Roth IRA contributions then the earnings from the return of excess contribution can create a new excess contribution.
You will have to pay the 6% penalty on your 2023 return on the new excess.
If you cannot apply the 2023 excess as a 2024 contribution then you will have to pay the 6% penalty on your 2024 return:
- Click on "Search" on the top right and type “IRA contributions”
- Click on “Jump to IRA contributions"
- Select “Roth IRA”
- On the "Do you have any Excess Roth Contributions" answer "Yes"
- On the "Enter Excess Contributions" screen enter the total excess contribution from 2023
- On the "How Much Excess to 2024?" screen enter the amount applied to 2024.
If cannot apply the excess to 2024 then you need to take a regular distribution without earnings, since it is after the due date of the 2023 return to remove the 2023 excess contribution. You will get a 2025 Form 1099-R with code T or Q. When you add the 2025 Form 1099-R on your 2025 return, it will resolve the excess in 2025.
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