@SageofW wrote:
Can you explain more about not having to withdraw excess earnings? My understanding is that to avoid the 6% penalty, you have to withdraw both the original contribution plus the earnings as calculated per IRS NIA formula of that excess portion?
There are two slightly different conversations happening in this thread, so check who is responding to whom.
To remove the excess and avoid a penalty, you must contact the IRA custodian and request a removal of excess contribution before April 15, 2025. This is not a regular withdrawal, you must ask for the special procedure. The custodian will send you back your contribution plus the NIA earnings--they know to do this automatically as part of the process. This is reported as income on your 2024 return even though the earnings are not returned until 2025. To report the earnings correctly in Turbotax, you must report as if you got a 1099-R. Put the total amount that was returned in box 1, the NIA earnings in box 2a, and use code P and J in box 7. Ignore all the other boxes. The return of contributions is not taxable, the NIA earnings are taxable but not subject to a 10% penalty for early withdrawal.
