My partner and I both contributed the max to our Roth's last year (2023) but ended up earning too much for any contribution. Their Roth is at Fidelity, mine is at Vanguard. We both successfully completed withdraws of $6,500 plus what was assessed as gains. Fidelity required 10% taken out for federal taxes, but otherwise no taxes were withheld.
I'm doing our taxes, using Turbotax. I don't yet have 1099-Rs for either of us and in any case can't figure out where to get the information to enter excess contribution info for 2023. Turbotax seems to only want to ask for the year prior since it assumes I would only get a 1099-R the following year. I guess a lot of people don't realize they overcontributed until they've already filed. In this case we realized beforehand (last year actually) and withdrew the money last month. We didn't want to deal with transferring to an IRA though I'm wondering now if we should have done that.
Neither of us has IRAs. My partner has a traditional 401k, I have a traditional 401k and small Roth 401k at Fidelity with a former employer, and a new one of each at Vanguard. I should streamline but for the time being just would love some help figuring out how to enter this in my taxes before the deadline!
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Can anyone help with this? Should I just forget about it until next year?
You needed to remove the contributions and any earnings attributable to the contribution.
For the contribution, you run the Turbotax interview, say you made a Roth contribution, the program warns you, then you say that yes, you will remove the excess before the deadline.
At this point, you will not receive a 1099-R because the withdrawal happened in 2024, so the 1099-R will be reported in January 2025 for next year's tax return. You also won't get credit for the taxes that were withheld until next year, since they are in the system as 2024 withholdings. But you do need to pay income tax on the earnings that were withdrawn with the returned contribution. (There is no longer a 10% early withdrawal penalty when you withdraw earnings from an excess contribution but there is income tax.)
You need to enter a "fake" 1099-R that contains the information that your 2024 1099-R will contain. List the name and EIN of the account trustee. Box 1 is the total amount withdrawn, box 2a (taxable amount) is the amount of the earnings, and for box 7, use codes P and J. Don't include the withholding.
Then on your 2024 taxes that you prepare in Spring 2025, you will get a 1099-R from Fidelity that shows the withdrawal, the taxable earnings, and the withholding. Enter the 1099-R on your tax return, because of code PJ, the earnings won't be taxed again. And you will get credit for the withholding which will reduce your other taxes owed or increase your refund.
@dmertz do you have anything further?
Because you don't have traditional IRAs, you can do a "backdoor Roth IRA" contribution. It's too late to reverse what you already did, but you can still do the backdoor for 2023 as long as you get started before April 15, 2024. We can go into more detail about that if you want.
For removal of excess, search the forum for "PJ"
The question is asked dozens of times each year.
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