Hi everyone, I’m looking for help with correcting an excess Roth IRA contribution from 2023 that I just discovered in 2025. Here's a summary of my situation:
Filing status: Single
Age in 2025: below 59
2023 Roth IRA contribution: $6,500
Allowed contribution: $1,090
Excess: $5,410 (not caught in my 2023 tax return, and I did not file Form 5329)
In 2024, I over-contributed again by $4,846 but caught the error before filing. I recharacterized the $4,846 plus earnings of $820 by transferring securities worth $5,944.30 to my Traditional IRA. I believe I just need to report this recharacterization on my 2024 tax return (before the April 15 deadline) and I should be fine.
Here’s where I need help:
Since it’s now 2025, I’m told I can no longer recharacterize or withdraw the 2023 excess contribution as a “return of excess” — Merrill Edge (my Roth IRA custodian) says the only option is to take a regular/premature distribution.
Conflicting info: Some reps (TurboTax advisors and Merrill Edge reps) told me:
The entire withdrawal is subject to a 10% early withdrawal penalty.
Others said only earnings are penalized.
Others said the withdrawal of excess contributions is not taxed or penalized at all.
I’m confused: If I take a regular distribution now, do I withdraw just the $5,410 original excess, or should it include earnings/losses? And how will this be taxed and reported on the 1099-R?
Amending 2023 Tax Return:
Since I didn’t report the excess in 2023, should I file an amended 2023 return with Form 5329 and pay the 6% excise tax (~$325)? (some turbo tax advisors told me not to...)
Then, for 2024, I would file Form 5329 again and pay another 6% excise tax (~$325), unless part of the excess is absorbed by 2024 contribution limits (which I didn’t use for Roth due to the income limit).
What amount should I withdraw in 2025 — just the excess contribution, or the excess plus earnings?
Will the withdrawal be taxed or penalized? If so, how much?
How do I communicate clearly with Merrill Edge to ensure the 1099-R reflects it correctly (as removal of excess vs regular early distribution)?
Should I amend my 2023 return, and what exactly should I report for 2024?
I’d really appreciate guidance from anyone who’s been through this or has experience correcting Roth IRA excess contributions discovered late. Thanks in advance!
1. Amend 2023 to report the excess and pay the 6% penalty on the excess contribution.
2. File 2024 to report the Roth contribution and the rechacterization. If the recharacterization is non-deductible (not deductible to the traditional IRA because of your filing status, you will now have a non-deductible basis in your IRA that is reported and tracked on form 8606, you need to keep that for the future.
Your 2024 tax return will also assess another 6% penalty on the 2023 excess that remains in the Roth IRA.
3. You can withdraw $5410 from the Roth in 2025. This would be a regular (early) withdrawal, not a withdrawal of excess. The taxability depends on your overall Roth IRA contributions and earnings and any past withdrawals. You can always withdraw your Roth contributions tax-free. Roth withdrawals are always contributions first, conversions second and earnings last. As long as you have at least $5410 of prior contributions that have not previously been withdrawn, the current withdrawal would be tax-free. You can't remove just the earnings from the excess, since you missed the deadline for that procedure.
You can withdraw $5410 from the Roth in 2025. This would be a regular (early) withdrawal
So we do not need to withdraw the interest as well? Only the contribution amount to avoid further penalties?
@tcjaeger2 wrote:
You can withdraw $5410 from the Roth in 2025. This would be a regular (early) withdrawal
So we do not need to withdraw the interest as well? Only the contribution amount to avoid further penalties?
Correct. The 6% penalty addresses the earnings issue. You just withdraw the excess contribution amount.