Accidentally did a distribution withdrawal from my Roth IRA instead of excess contribution withdrawal

[tyentr99]

I have a Roth IRA account through Merrill and have contributed $4,000 to it so far this year (2025). However, recently realize I will be making too much money this year to contribute to my Roth IRA. I read online that I can remove the excess contribution so I transferred the money out of the Roth account. Unfortunately, I realized I did this wrong and the withdrawal was done as a distribution withdrawal instead of a excess contribution withdrawal. I tried calling Merrill to see if it can be corrected but they said there's nothing they can do and a tax form has already been generated and will be sent to the IRS. They said I'll have to talk to a tax advisor to see if there's anything I can do.

I was wondering if this is something I can correct myself in the TurboTax app when filing my return next year? If so, how?

I still want to contribute the max allowed for this year so I was thinking of contributing $7,000 to a traditional IRA and rolling it over to the Roth. Would there be any issue with this or should I play it safe and only do $3,000?

As far as earnings from the contributions, I actually lost a money from the account overall since making the contributions.

Thanks for any information or advice in advance!

[Opus 17]

What are your current balances in Roth and traditional IRAs?

When did you do the regular withdrawal?  Was it more or less than 60 days ago?

[tyentr99]

@Opus 17 

I currently have $0 in any traditional IRA. I had rolled over my old traditional IRA with a balance of $1,894.76 to my Roth this year. I have not made any contributions a traditional IRA this year.

My Roth IRA currently has $1,688.42 in it.

I made the $4,000 regular withdrawal today, so less than a day old.

Thanks!

[Opus 17 · Accepted solution]

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@tyentr99 wrote:

@Opus 17 

I currently have $0 in any traditional IRA. I had rolled over my old traditional IRA with a balance of $1,894.76 to my Roth this year. I have not made any contributions a traditional IRA this year.

My Roth IRA currently has $1,688.42 in it.

I made the $4,000 regular withdrawal today, so less than a day old.

Thanks!

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OK, so you have 60 days to do a rollover, that is a transfer from one Roth IRA to another or even back to the same IRA, without tax consequences.

I would send the $4000 back to the Roth IRA as a rollover, not an original contribution.  This might take some extra paperwork (i.e. there might be a form to fill out that is more than a simple contribution).  But note that you can only do this kind of rollover (where the money comes to you in between) once per year.  You can do as many direct transfers as you like.

Once the money is safely in the Roth IRA, you have two options.  One is to withdraw the excess (plus earnings) via the special procedure.   But if your ultimate goal is to have the money in a traditional IRA as a non-deductible contribution that you can convert to a Roth (backdoor Roth), then you don't need to withdraw and re-deposit it.  Just do a recharacterization.  You can recharacterize the Roth contribution as a traditional IRA contribution, this means the trustee will move the $4000 contribution (plus earnings) into a traditional IRA, as if it had been there all along.  Then later you can to a conversion to a Roth IRA as a "backdoor" Roth.  Yes, it's a lot of steps to end up right where you are now, but that's how the law works.  When you do the Roth conversion, the earnings will be taxed at that time.  But if you do the "withdrawal of excess" procedure the earnings will still be taxed. 

Then, if you want to maximize your IRA contributions, you can make another $3000 non-deductible contribution to a traditional IRA (to get to a total of $7000 contributions for the year) and convert that to a Roth. 

[tyentr99]

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OK, so you have 60 days to do a rollover, that is a transfer from one Roth IRA to another or even back to the same IRA, without tax consequences.

I would send the $4000 back to the Roth IRA as a rollover, not an original contribution.  This might take some extra paperwork (i.e. there might be a form to fill out that is more than a simple contribution).  

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@Opus 17 

Thanks for the advice. I'm trying to read up on the 60 day rollover option. Are you sure you can do it to the same Roth IRA account? It seems like it has to be a different IRA account: https://www.irs.gov/retirement-plans/plan-participant-employee/rollovers-of-retirement-plan-and-ira-...

Really appreciate the advice. I'll look into it further. Thanks!

[Opus 17]

Publication 590-A

Rollover From a Roth IRA

You can withdraw, tax free, all or part of the assets from one Roth IRA if you contribute them within 60 days to another Roth IRA. Most of the rules for rollovers, described in chapter 1 under Rollover From One IRA Into Another, apply to these rollovers. However, rollovers from retirement plans other than Roth IRAs are disregarded for purposes of the 1-year waiting period between rollovers.

• A rollover from a Roth IRA to an employer retirement plan isn’t allowed.
• A rollover from a designated Roth account can only be made to another designated Roth account or to a Roth IRA.
• If you roll over an amount from one Roth IRA to another Roth IRA, the 5-year period used to determine qualified distributions doesn’t change. The 5-year period begins with the first tax year for which the contribution was made to the initial Roth IRA. See What Are Qualified Distributions? in chapter 2 of Pub. 590-B.

Note that where it says most of the same rules apply as Traditional IRAs, then notes 3 exceptions.  A self-rollover is not one of the exceptions.  Self-rollovers are explicitly mentioned in chapter 1 under traditional IRAs.

More important, the A in IRA doesn't mean "account", it means "individual retirement arrangement."   No matter how many traditional IRA accounts you have at different brokers, you have one "arrangement", and this is why the RMD and pro rata rules work the way they do.  Likewise, no matter how many Roth IRA accounts you have at different brokers you have one Roth "arrangement."

But in fact, the rollover-->recharacterize-->convert method will work even if you open a different Roth IRA account.  You made your withdrawal from broker 1.  You could deposit the money in a Roth IRA at broker 2 (as long as you tell them it is a rollover and not a contribution), then recharacterize it as a traditional IRA at broker 2, then convert it to a Roth IRA at broker 1 or 2 (as long as it was a direct conversion).   It makes no difference if you pass the money through broker 2 or back to broker 1 since you only have one individual retirement arrangement. 

[dmertz]

There is no restriction on the rollover being back to the same account from which the distribution occurred, other than the general one-rollover-per-12-months limitation on traditional IRA-to-traditional IRA and Roth IRA-to-Roth IRA rollovers combined.  The fact that the rollover can be to a different IRA does not preclude you from rolling the distribution back to the original IRA.  The statute imposes no requirement that the receiving IRA be a different IRA.