Help with Correcting 2023 Roth IRA Over-Contribution (Discovered in 2025)

[wendy0205w]

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)

2024 Excess Contribution (Fixed, i think...)

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.

2023 Excess Contribution (Trying to Fix in 2025)

Here’s where I need help:

1. 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.

2. 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?

3. 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).

My Main Questions:

• 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!

[Opus 17]

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.  

[tcjaeger2]

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?

[Opus 17]

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@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?

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Correct.  The 6% penalty addresses the earnings issue.  You just withdraw the excess contribution amount.