@RNTAX2025 wrote:
Hello, I have requested the excess contribution from Fidelity. This would $950 from Roth IRA and $950 from the Rollover IRA, correct? It would be okay to file my taxes now or I have to wait until I get the taxes amount on the earnings? As soon as I removed the excess contribution amounts, the 6% penalty is gone. I am not sure how to report the earnings. There is not much since the amount sat in a cash amount. Please let me know. Thank you.
You need to wait until you get the money, or at least until you know what the dollar amount of the returned earnings will be.
For the Roth IRA
1. Start by reporting the Roth contribution. When Turbotax says it's excess, tell Turbotax you will remove the excess on time. That will remove the 6% penalty.
2. Then, go to the retirement income section and create a substitute 1099-R for the withdrawal, since you won't get an actual 1099-R until next year. Put the entire amount of the withdrawal in box 1, and the taxable amount (attributed earnings, as calculated by the IRA custodian) in box 2a. Enter codes P and J in box 7. You will pay income tax on the earnings, but they are not subject to an additional 10% penalty for early withdrawal. The returned contribution is not taxable.
For the traditional IRA:
1. Start by reporting the IRA contribution. When Turbotax says it's excess, tell Turbotax you will remove the excess on time. That will remove the IRA tax deduction and the 6% penalty.
2. Then, go to the retirement income section and create a substitute 1099-R for the withdrawal, since you won't get an actual 1099-R until next year. Put only the interest amount in box 1 and the same amount in box 2a. Enter codes 2 and P in box 7. You will pay income tax on the earnings, but they are not subject to an additional 10% penalty for early withdrawal.
