Retirement tax questions
Generally the financial institution should calculate the earnings for you when you request the withdrawal of the excess contribution plus earnings since the calculations can get complicated. Did you check with them?
Calculating the earnings on an excess contribution:
Contribution x (Adjusted Closing Balance -Adjusted Opening Balance)/ Adjusted Opening Balance
Generally, financial institutions will use this rule:
- If you made the excess Roth IRA contribution in 2024 for 2023 and then withdrew in 2024 then you will have code 8 and J on your 2024 Form 1099-R, and it will have to be reported on your 2024 tax return.
- If you made the excess Roth IRA contribution in 2023 for 2023 and then withdrew in 2024 then you will have code P and J on your 2024 Form 1099-R, and it will have to be reported on your 2023 tax return.
