How to calculate gains and losses of excess contribution for traditional IRA?

[8rainbow]

I was not aware that as a retired person with no earned income, I was not allowed to contribute to a traditional IRA. I contributed total $5,000 in Feb. March, April and September last year.   I know what I should do now is to remove the excess contribution and the gain if any from my IRA account by 4/15 this year. But I still have more questions about this procedure.

How to calculate gain and loss in my case?

How to file my tax return this year without 1099-R which will come to me next year? 

If I  choose to wait until I receive the 2026 Form 1099-R in 2027 and amend my 2025 return, should I report excess contribution and pay the penalty this year?

Thank you very much. 

[Opus 17]

Tell the bank or broker that the contributions were not allowed (excess) and you need to remove them.  (This is not a regular withdrawal and may require a special form.)  They will calculate the excess and return it to you.  You don't need to do it yourself (and the formula is complex, the IRS basically requires the broker to do it.)  The interest is taxable on your 2025 return even though it will be paid in 2026.  Report it as simple bank interest without a 1099, or as miscellaneous other income (either is correct).    The return of the $5000 is not reported as a withdrawal, it is reported differently.  When Turbotax recognizes that the contributions were excess, the program will ask if you plan to remove them before the tax deadline, and when you say yes, the program will fill out the correct forms.  You will not get a revised 1099-R for the 2025 tax season.  

In 2026, enter the 1099-R you will get, it should be coded in such a way that Turbotax will recognize it as non-taxable on your 2026 return.

You could file without removing the excess, you will pay income tax plus a penalty on the excess amount.  But it won't change how you amend the return later.  The 2026 1099-R showing the withdrawal would never be reported on your 2025 return.  Your amended 2025 return would still use the procedure I described above. 

[8rainbow]

Dear Sir,

Thank you very much for your kind response. But the problem is that my bank which is Merrill told me they will not do the gains and losses calculations for me. The withdraw form they provide to me also shows it that it is my responsibility to do the calculation.  What should I do? Many thanks to you.

[8rainbow]

By the way, my IRA account is self-directed. Maybe this is the reason why they ask me to do it by myself. Many thanks to you. 

[dmertz · Accepted solution]

The tax code specifies the calculation here:  https://www.law.cornell.edu/cfr/text/26/1.408-11

[8rainbow]

Dear Sir,

Thank you very much for your kind help.  Have a great day.

[8rainbow]

Dear Sir, 

Where should I put the return of the $5000 when I file the tax return? Many thanks to you.

[fanfare]

self directed has nothing to do with it.

Chs. Schwab calculated the allocated earnings and prepared a check by noon of the day after submitting the excess removal request via their message page.

PS

If you lost money during the period, then the distribution is less than the contribution, and you get a backdoor IRA contribution without any income.

@8rainbow 

[8rainbow]

Dear sir, 

If any distribution happened after the excess contribution period,   how to calculate the gain and loss? Many thanks.

[fanfare]

There is no gain or loss on a Roth IRA if there is no excess contribution.

It is all tax-free income.

@8rainbow