How to account for withdrawal of excess Roth IRA contributions for the same tax year made before and after Jan 1

[jb6001]

This is my first year dealing with excess roth IRA contributions due to an unexpected bump in income. I had my broker process the necessary withdrawals and calculate the gain/loss. Thanks to a few related posts, I think I have correctly updated TurboTax to know that the excess contributions were withdrawn, and it now correctly shows $0 roth IRA contributions for 2024 tax year. And I have preemptively entered a 1099-R with box 7 codes J & P and told TurboTax the 1099-R is for 2025. I also understand that I can skip all of this and instead amend my return next year, but I would prefer to get it all done now and avoid having to amend.

My situation:

I normally contribute to my Roth IRA monthly, but in 2024, my broker forgot to update my monthly contribution, so I was short of the max contribution at the end of the year. We discovered this and made a final contribution in March '25 for tax year 2024. Simultaneously, my monthly contributions continued for the first three months of 2025.

Fast-forward a couple weeks when I discover all these contributions need to be withdrawn. My broker has to process two separate distributions based on the combination of the year the contribution was made and the applicable tax year: 2024 contribution for 2024 tax year and 2025 contribution for 2024 tax year.

I'm looking for clarification regarding how to report the two 2024-tax-year withdrawals.

The question:

I found one (and only one) very helpful help document in TurboTax that helped me with the 1099-R. Unfortunately this help file only shows up in the step by step interview on the page that informs you about the excess contribution penalty, so it can be hard to find. It is titled "Withdraw the Excess Contribution from Your Roth IRA" and walks through 3 different scenarios for different contribution years and withdrawal years.

This help document states very clearly:

Made the contribution to the Roth IRA in 2024, and withdrew it in 2025:
This is probably the most common situation: If you made the contribution to your Roth IRA in 2024 (between January 1, 2024 and December 31, 2024), and you withdrew it in 2025, you'll get a Form 1099-R. However, you might not get the Form 1099-R until 2025.

Your Form 1099-R will have a code P and a code J in box 7.

The Form 1099-R will indicate it is for 2025. One way to handle this is to create an amended 2024 return (Form 1040X) and include it there.

There's an easier way, though: Just enter the Form 1099-R on your 2024 return. When you do, enter code P and code J in box 7. You will be asked whether this Form 1099-R was issued with the year 2024 or 2025 printed on it. Select 2025.


Made the contribution to the Roth IRA in 2025 but it counted as a 2024 contribution, and withdrew the contribution in 2025:
If you made the contribution to your Roth IRA in 2025 (between January 1, 2025 and the 2024 filing deadline without extensions), but you designated it as a 2024 contribution, and you withdrew it in 2025, the Form 1099-R you get will be for 2025.

Include the Form 1099-R on your 2025 return.

Your Form 1099-R will have a code 8 and a code J in box 7.

According to this, I should only include a 1099-R for the first of my withdrawals that includes contributions made during the 2024 calendar year. Whereas, if this is to be believed, the second withdrawal, which was for a contribution made in 2025 and for the 2024 tax year, should be reported and handled next year on my 2025 taxes.

My problem is that while this is plausible (and I wouldn't put anything past the IRS in terms of confusing and inconsistent rules) this doesn't completely make sense to me, and I can't find any corroborating information on irs.gov or other websites (or this forum) to confirm that this is the correct approach. In the IRS 1099-R documentation and Publication 590-A, they simply use the generic wording "earnings are taxable in the year in which the contributions were made". In most other contexts, late contributions made between Jan 1 and Apr 15 are counted as if they were made in the previous year, and the TurboTax interview questions often reiterate this. So I don't know if "in the year in which the contributions were made" is meant to be taken literally by calendar year, or in the more commonly applied sense of the tax year the contributions were attributed to.

Do both of the 2024-tax-year withdrawals need to be reported with 1099-R's on my 2024 tax return, or just the one associated with contributions that were actually in 2024 calendar year? If I do need to include both withdrawals, can I add the amounts together on a single 1099-R, or do I need to add a separate 1099-R for each withdrawal?

[DanaB27 · Accepted solution]

In your case it might be best to confirm with your financial institution how they will issue the Form 1099-R. 

Technically, you should get only a 2025 Form 1099-R with codes P and J, since a contribution made in 2025 for 2024 is deemed to have been made in 2024. But some financial institutions will issue 2025 Form 1099-R with code 8 and J since the contribution was made in 2025. As you noticed the IRS wording is vague with "earnings are taxable in the year in which the contributions were made".

Therefore, it is best to check with your financial institute how they will issue the Form 1099-R so you can correctly report what the financial institution has sent to the IRS.  

If they only use Form 1099-R with code P and J then you can combine the withdrawals one Form 1099-R. 

[jb6001]

I appreciate your analysis. I checked with my broker's office, but I don't think they have this exact situation very often. They could only share a "normal" example of someone who made all their contributions in the actual tax year, not after Jan 1.

It seems safer if I combine both withdrawals and report the total amount on this year's taxes. That makes more sense to me, and if I'm wrong and it turns out that I should have put the smaller second withdrawal from this year on my 2025 taxes, I can add it again on next year's taxes. If I under-report the amount on my taxes now by not including the second withdrawal, I would definitely still have to file an amended return for 2024 and pay a small additional tax. But if I accidentally overreport by combining both withdrawals when it turns out I should have kept them separate, would there really be any need to amend 2024 to correct a mistake that is in the government's favor, so long as I correctly add the 2025-taxable amount again next year? The gains on the excess contributions were minimal, so paying the taxes twice would be well worth not having to amend.

[DanaB27]

Correct, if you overpaid on your 2024 return then it is up to you if you want to amend your 2024 return to claim a refund.