An in-service withdrawal is just a distribution from your retirement plan. Which means that it will show as a taxable distribution on your 2025 taxes. I don't understand why they couldn't classify it as a return of excess contribution which would just mean that it was standard income.
You have a couple of options here. You can enter it in this year's tax return as a return of excess contribution using the instructions @MAK70 gave you above. Then, on your 2025 return, you would only enter the tax withheld onto your return since you have already entered the amounts from the 1099-R that you will receive.
This may result in questions from the IRS since the 1099-R will have a different code than you are expecting. However, you should have all of the emails between you and the financial management company that you can present to the IRS as proof that you requested and received the amount prior to the due date of the return.
That option is attractive because it's the cheapest.
The other option is to say that you did pull the money out by the due date of the return this year but not include it in income for 2024. Instead you will enter the 1099-R as it is presented in 2025 and pay taxes and a penalty on it at that point.
That option is attractive because the forms will match. But the 10% penalty for early withdrawal will apply.
@ernie563
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