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.