I contributed $7,000 to my Roth IRA in November 2024 for the first time and later found out I'm over the MAGI limit and withdraw the whole amount in December 2024. I received a 1099-R with $700 federal income tax withheld on Box 4 and Code J for Distribution Code box 7. My understanding is I'm withdrawing my contribution made in the same year and it should not be taxed or penalized. When I put $7,000 under "Corrective distribution made before the due date of the return", my tax still went up $982 while I was expecting a reduction of $700 for the witheld amount. Since this is my first year contributing I also couldn't put $7,000 to prior year contributions which will result in a reduction of $700 tax owed. What am I doing wrong here?
