I made 26K after-tax contributions to my 401K (Fidelity) and rolled it over to Roth IRA at Vanguard. Fidelity later determined that 4K out of 26K was an excess contribution. I have received 2 1099-Rs from Fidelity, 4K for distribution with code E, 22K for distribution with code G. I can file taxes with these forms. My main question is that if I don't remove the 4K from Roth, would IRS know? Probably not. IRS has no way of knowing if all 26K went to Roth IRA or only 22K went to Roth IRA, correct? If IRS would not know, then there is no point in trying to remove this fund from Roth IRA. My inertia for removal comes from the fact that Vanguard is saying that if I take such a step, not only will I be paying taxes on any growth, I will also be paying a 10% early withdrawal penalty on that growth.
