smart check said no overrides for efilling. once removed I have the 6% penalty.
something is not right.
Let's start over on this, and make sure we are on the same page.
- December 2024 excess contribution made.
- April 2025, excess contribution withdrawn at a loss.
- Received a 2025 1099R with only code J in box 7.
Code J stands for an Early Distribution from a Roth IRA. It tells the IRS that he took money out of his Roth IRA in 2025 before he reached age 59½. Ideally, the brokerage should have put Codes P and J in Box 7 to signify it was a return of a prior-year excess contribution.
If they only put Code J, they processed it as a standard early withdrawal instead of a formal "Return of Excess."
Because he withdrew the money at a loss, his earnings were $0. Even with just a Code J, he will not owe any taxes on this. He will simply use his Roth IRA "basis" (the record of his original contributions) to shield the withdrawal from taxes.
To ensure the software doesn't penalize him, he needs to enter the form and navigate the follow-up screens carefully to trigger Form 8606 (Part III).
- Navigate to the Wages & Income section and enter the 1099-R exactly as it is printed, including Code J in Box 7.
- After clicking Continue, the software will ask if he used the money for a first-time home purchase or qualified medical expenses. He can answer No.
- The most critical screen will ask for his Net Contributions Prior to 2025 (this is his Roth basis).
- He must enter the total dollar amount of all the contributions he has ever made to his Roth IRA in previous years (including the contribution from December 2024 that was withdrawn in 2025).
- TurboTax will compare his Box 1 withdrawal amount to his total lifetime contributions. Since the withdrawal is covered by his contributions, the penalty amount drops to $0.
