Excess Roth IRA contribution and earnings removed for TY 2024

[sjscherf]

Hello, I was working on our tax year 2024 tax return and had it finished and nearly ready to file when I realized I had an excess Roth IRA contribution. I had forgotten I had contributed $75 in January of 2024 to my Traditional IRA, and with the $8,000 I had contributed to my Roth IRA in 2024, that put me over my yearly limit by $75. My financial advisor at Edward Jones was able to have the excess $75 contribution made to the Roth IRA removed along with the $4.45 earnings. The $75 and the $4.45 earnings were transferred into a joint mutual fund account my wife and I have with Edward Jones. I'm just not sure what steps I need to do to update our tax return before filing. I did go into the IRA contributions and adjusted the amounts so that it reflects the $75 contribution to my traditional IRA and $7,925 to my Roth IRA (instead of the $8,000 I had originally entered). Do I need to enter the $4.45 earnings somewhere? Am I supposed to receive a Form 1099-R for these earnings? The removal was just completed on March 6, 2025. I am not sure if I am going to be receiving a 1099-R for this or not. Would I be getting one? Is there any other form I should/would be getting? Is there a penalty I will need to pay and if so, does that get directly taken out from the refund we are scheduled to receive? I appreciate any help and/or direction you can give me.

[DanaB27 · Accepted solution]

If you made an excess contribution in 2024 and withdrew the 2024 excess Roth IRA contribution plus earnings in 2025 before the due date, then you will get a 2025 Form 1099-R in 2026 with codes P and J. This 1099-R will have to be included on your 2024 tax return and you have two options:  

• You can wait until you receive the 2025 Form 1099-R in 2026 and amend your 2024 return or
• You can report it now in your 2024 return and ignore the 1099-R when it comes unless there is Box 4 Federal Tax withholding and/or Box 14 State withholding. Then you must enter the 2025 Form 1099-R into the 2025 tax return since the withholdings are reported in the year that the tax was withheld. The 2025 code P will not do anything to your income to the 2025 tax return income but the withholdings will be applied to 2025.

To create a Form 1099-R in your 2024 return please follow the steps below:

1. Login to your TurboTax Account 
2. Click on the "Search" on the top right and type “1099-R” 
3. Click on “Jump to 1099-R”
4. Answer "Yes" to "Did you get a 1099-R in 2024?"
5. Select "I'll type it in myself"
6. Box 1 enter total distribution (contribution plus earning)
7. Box 2a enter the earnings
8. Box 7 enter J and P
9. Click "Continue"
10. On "Is the IRA/SEP/SIMPLE box on this 1099-R checked?" screen answer "No, the box is blank"?
11. On the "Which year on Form 1099-R" screen say that this is a 2025 Form 1099-R.
12. Click "Continue" after all 1099-R are entered and answer all the questions.
13. Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings under "Corrective distributions made before the due date of the return".

Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2023" but you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2024.

No, there won't be a penalty since you withdrew the excess plus earnings before the due date. There also won't be a 10% early withdrawal penalty since the "Corrective distributions made before the due date of the return" exception applies.

[sjscherf]

Dana thank you for the information! I will follow those steps later today and hopefully get that taken care of. I do have one other question that I should have included with my original post and hopefully you can answer as well. In 2024 I had a rollover IRA with Fidelity, which is where my $75 contribution in January of 2024 went. On March 4, 2024 I transferred my Fidelity account to Edward Jones, along with other accounts my wife and I had. My Edward Jones financial advisor said I needed to contact Fidelity to find out what the attributable gain/loss was of my $75 contribution to the IRA in January 2024 until the transfer to my Edward Jones account on March 6, 2024. I contacted Fidelity and they told me there was a gain of $1.31. My question is do I need to account for this $1.31 gain on my TY2024 return, and if so how/where do I do that? Thanks again for your help!

[DanaB27]

You will request the withdrawal of the excess $75 contribution plus the $1.31 plus the gain while it was with Edward Jones. Edward Jones will issue the 2025 Form 1099-R in 2026 to show the whole distribution in box 1 and the total earnings in box 2a.

If you want to avoid amending your return you can enter a 2025 Form 1099-R now with the steps provided above.

[sjscherf]

Dana, thanks again for the reply. Ok, I think I may have worded things a little incorrectly and just want to make sure I've explained everything and I'm going to do this correctly and you fully understand the situation. The $75 contribution in January 2024 to my Fidelity IRA wasn't the excess contribution that was withdrawn. Edward Jones withdrew $75 from my Roth IRA because I had contributed $8,000 to the Edward Jones Roth IRA in 2024 in addition to the $75 contribution to the Fidelity IRA in 2024 so that put me over the $8,000 limit. So they took the $75 out of the Roth IRA plus the $4.45 earnings and moved it to our Mutual Fund account. On March 4 of 2024 the Fidelity IRA was transferred over to Edward Jones, which had an attributable gain of $1.31 on the $75 contribution before the account was transferred to Edward Jones.

So in a nutshell, I had a $75 excess contribution in 2024 to my Edward Jones Roth IRA which had earnings of $4.45. I also had earnings of $1.31 from my Traditional IRA $75 contribution with Fidelity. I will want to report everything now rather than do an amendment next year. So do the steps you provided in the first reply still apply to what I've just tried to clarify? With your latest reply you say to "request the withdrawal of the excess $75 contribution plus the $1.31 plus the gain while it was with Edward Jones. Edward Jones will issue the 2025 Form 1099-R in 2026 to show the whole distribution in box 1 and the total earnings in box 2a." I'm taking that to mean when I enter the information into the 1099-R, in Box 1 I will enter $75 plus the $4.45 (from the Edward Jones excess removal) plus the $1.31(From the Fidelity gain) for a total of $80.76 and then in Box 2 I just enter the earnings which is $4.45 + $1.31=$5.76? Is that correct?

Again, I thank you so much for your help and understanding with all of this. Certainly more complicated for me than I would have liked. If not for the $75 extra contribution which should have been caught before it happened, our tax filing would have been long done by now! 

[DanaB27 · Accepted solution]

Thank you for the clarification. If I understand you correctly the traditional IRA with Fidelity was rolled over (transferred) to a traditional IRA with Edward Jones. If this is correct then you do not need to report the gain of $1.31 since this was a rollover. I assume since this was a trustee to trustee transfer you didn't get a Form 1099-R for this rollover. Therefore, you don't have anything to report.

In regards to entering the Form 1099-R for return of excess Roth IRA contribution plus earnings, box 1 is $79.45 ($75 plus $.45 gain) and box 2a is $4.45 (gain from Edward Jones).

[sjscherf]

@DanaB27 thank you again for the response!

So with the Traditional IRA with Fidelity, it was originally a 401k with Fidelity thru my job. Then when I lost my job in 2020 due to Covid, I took the 401k and rolled it over into a traditional IRA with Fidelity. Then in march of 2024, I transferred it over to Edward Jones along with other investment accounts my wife and I had to consolidate things and make it easier by having all our retirement accounts with Edward Jones. I have not received a Form 1099-R for the IRA, either from Fidelity or Edward Jones. 

Regarding the $1.31 gain from the Fidelity IRA, I was asked by my financial advisor's assistant from Edward Jones to contact Fidelity to find out what the gain/loss was of the $75 contribution I had made to the Fidelity IRA in January of 2024. I wasn't sure exactly why I needed to get that information or how that comes into play either for the 2024 tax return or next years, if at all.

I appreciate your help with all of this. I realize you are probably very busy and wasn't sure if you had gotten my last message or when you were going to respond to it, so probably while you were responding to me just now, I reposted about this excess contribution situation again, with hopefully a little more clarity than the first time in case anyone else was able to comment on this. So you may see another post from me on this.

[DanaB27 · Accepted solution]

Yes, since this was a trustee to trustee transfer you do not get Form 1099-R. 

No, the $1.31 gains won't affect anything.