Excess Roth IRA Contribution Reported as Removed by Tax Filing Deadline When Actually It Did Not Get Withdrawn Until After Filing

[blackrhino]

Need some help on how to rectify the situation I find myself in:

1. March 25 - made a $5100 prior year (2024) contribution to my Roth IRA

2. April 25 - prepared tax return, realized I had exceeded the Roth IRA contribution MAGI limit, and requested my financial institution withdraw the excess contribution which they said they would do.

3. April 25 - filed my return indicating that the excess contribution would be withdrawn by the tax filing deadline (My IRA Contribution Worksheet, Regular Roth IRA Contributions, Line 25 reflects the $5100 to be withdrawn before tax filing deadline).

4. May 25 - I find out the financial institution did not complete the withdrawal of the excess contribution and thus they finally execute the withdrawal on 05/21/2025.

5. Jan 25 - I receive 2 1099-R's relating to the excess contribution withdrawal

1st 1099-R: Box 1: $5100, Box 2: $243.03, Box 7 PJ

2nd 1099-R: Box 1: $243.02, Box 7 8J

6. APR 25 - I enter both 1099-R's as part of filing 2025 taxes and now I see I have Form 5329 filled out and Turbotax indicates I'm being taxed at 6% on the excess contribution amount.

So I've done some digging and I *believe* I see what's going on but I have no idea how to correct/compensate for it.

Specifically on Form 5329 Part IV, Line 18 it reports my 2024 excess contribution of $5100, but on Line 20 it shows $0, even though I withdrew (distributed) the excess contribution and it was reported on a 1099-R.

Thus Line 24 has my total excess contribution at $5100 and Line 25 has the additional tax of $306.

So I'm thinking the issue revolves around me having filed 2024 indicating the excess contribution was removed before filing (and thus all my basis totals in Turbotax are actually correct!) and that somehow preventing Turbotax from triggering my withdrawal of the funds in 2025 (ie, Turbotax believes the funds were already withdrawn so why should it ask again, right?!).

Any help/insight on how to resolve is greatly appreciated.

PS> I have Turbotax online PREMIUM (the product selection below does not list PREMIUM so I selected I Don't Know).

[DanaB27 · Accepted solution]

You withdrew the 2024 excess contribution in time since you removed it before October 15th, 2025 (IRS). Please do not say yes that you had an excess contribution when TurboTax ask about prior excess contributions. Please delete the entry:

1. Go to the IRA contributions screen under Deductions & credits in the Federal section.
2. Select Roth IRA continue through the questions until you get to the "Enter your excess Roth IRA contributions made in 2024 or prior years" screen and delete any entry.

To clarify, your excess contribution was $5,100? If yes, then your Form 1099-R doesn't seem correct. Box 1 should have the gross distribution (excess + earnings) and box 2a has the earnings (IRS). Please verify, the earnings and total amount returned to you. 

Also note, the 2025 Form 1099-R with code PJ belongs on your 2024 return. 

[blackrhino]

Thank you for the reply.  I will do as you advise re: not saying I had an excess contribution.

To answer your question -

Yes, my excess contribution was $5100. That is the amount I deposited into the Roth IRA in Mar '25 for 2024 tax year.

I received 2 1099-R's related to the excess contribution

1st 1099-R: Box 1: $5100, Box 2: $243.03, Box 7 PJ

2nd 1099-R: Box 1: $243.02, Box 7 8J

A total of $5,343.04 was returned to me via bank transfer.

When you say, "Also note, the 2025 Form 1099-R with code PJ belongs on your 2024 return."  Do I take that to mean I need to

1. Amend my 2024 return and include this particular form?

2. Remove this form from my 2025 return?

Thanks!

[DanaB27]

Yes, you will need to amend your 2024 return to include the 2025 Form 1099-R with code PJ since the earnings are taxable in 2024. Please see How do I amend my federal tax return for a prior year? 

Make sure you click Continue on the 1099-R summary screen after you added Form 1099-R with code PJ. Continue until the “These situations may lower your tax bill” screen then enter the amount of earnings under "Corrective distributions made before the due date of the return".