dmertz
Level 15

Retirement tax questions

Nothing has changed in the tax law with regard to obtaining a return of excess contribution.  The iterative (not "endless," it always eventually converges) calculation when your Roth IRA has experienced investment gains and your MAGI falls in the phase out range for a Roth IRA contribution exists as it always has.  Most people don't encounter the iterative calculation because most people probably don't fall in the phase-out range.

When there are gains, TurboTax can't calculate that actual amount that must be returned since you and TurboTax have no way of knowing the actual gains until you've already received the return-of-contribution distribution.  Rather than deal with the iterative calculation, I suspect that many people obtain a return of contribution of the initially indicated amount, pay the 6% penalty on the small amount of additional excess that results from the gain added to income, then wait until the following year to either apply that excess as a subsequent-year contribution or simply make a regular distribution equal to the amount of the excess, eliminating the excess.