OK, got it. So then, did you already file your return? If you plan to remove the excess on time, you would not pay the 6% penalty.
1. No, the IRA custodian will do it for you. You need to tell them that you must "withdraw excess", don't just make a regular withdrawal. They will know what to do.
2. No.
3. Yes. In fact, you must ask for a "withdrawal of excess contribution" to perform the procedure correctly. If you only withdraw the excess as a regular withdrawal, you are following a different procedure.
4. If you have already filed and paid the 6% penalty, but you want to do the "removal of excess procedure", then this is what happens:
1. The IRA custodian sends you your contribution plus the attributed earnings. This is taxable on your 2024 return even though the withdrawal occurs in 2025.
2. Prepare an amended return. Start by reporting the excess Roth, but tell Turbotax you will remove the excess on time. That will remove the 6% penalty, leading to a credit adjustment as part of the amended return.
3. You will need to include a substitute 1099-R for the withdrawal, since you won't get an actual 1099-R until next year. Put the entire amount of the withdrawal in box 1, and the taxable amount (attributed earnings, as calculated by the IRA custodian) in box 2a. Enter codes P and J in box 7. You will pay income tax on the earnings, but they are not subject to an additional 10% penalty because of changes in the SECURE 2.0 act a couple years ago.
4. Depending on the amount of earnings (subject to income tax) and your tax rate, your amended return might have you owing more tax or getting a refund, after you pay the tax on the earnings but get credit for the penalty you no longer owe.
Now, if you earned more than 6% on your contribution, and want to leave it in the IRA because the earnings are more than the penalty, there is a way you can do that as well, I can give those details if you want.
