I opened a Roth on 11APR24 and added $7500 for 23. Later found because of MAGI only qualified for $500. Withdrew $7000 plus int in DEC24. How do I fix on 24 taxes?

[bpbrun64]

I am trying to correct this on 2024 taxes, expecting to see a 6% penalty on the $7K overpayment come in on form 5329 and I am not seeing it. I also contributed $8k on 11APR2024 for year 2024. How do I fix this properly for the 2023 contributions on the 2024 tax return?

[DanaB27]

You do not need to pay the 6% penalty on your 2024 return because you removed the 2023 excess by December 31, 2024. You only need to pay the 6% penalty on your 2023 return. If you didn't then pleases see How do I amend my federal tax return for a prior year?

To confirm you took a regular distribution without earnings for the 2023 excess since it was after the extended due date? If yes, you should have a 2024 Form 1099-R with code J. When you enter this into TurboTax in your 2024 return then this will resolve the 2023 excess.

To confirm for the 2024 excess you requested the return of excess contribution plus earning in Dec 2024 and received a 2024 Form 1099-R with code 8J?

1. Click on "Search" on the top and type “1099-R” 
2. Click on “Jump to 1099-R” and enter all your 1099-Rs
3. Click "Continue" on the "Review your 1099-R info" screen
4. Answer all the questions and make sure you enter the net contributions prior to 2024 on the "Enter Prior Year Roth IRA Contributions" screen (include the 2023 excess contribution here)
5. On the "Do you have any Excess Roth Contributions" answer "Yes"
6. On the "Enter Excess Contributions" screen enter the total excess contribution from 2023.
7. On the "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings from box 2a under "Corrective distributions made before the due date of the return"

[bpbrun64]

So let me add some more context about the 2023 contributions to Roth. The $7500 was added on April 11, 2024 ; after I had already filed my 2023 return. It was coded to go against 2023. I did not remove the money (and earned interest) until December 23, 2024. Do I still need to amend 2023? If I need to amend 2023, is that where I enter the 2024 1099-R coded with “T”? What gets entered into 2023 and 2024? This is confusing. 

[DanaB27]

Check Schedule 2 line 8 of your 2023 tax return to check if you paid the 6% penalty on your 2023 tax return. You need to pay the 6% penalty on your 2023 return since you didn't remove the excess before the extended due date of the 2023 return. If you need to amend your 2023 return then all you need to do is enter the Roth IRA contributions in the IRA contribution interview under Deductions & Credits. TurboTax will fill out Form 5329 to calculate the 6% penalty.

It looks like you took a regular distribution without earnings since you Form 1099-R has code T.  On your 2024 return you will enter this Form 1099-R:

1. Click on "Search" on the top and type “1099-R” 
2. Click on “Jump to 1099-R” and enter all your 1099-Rs
3. Click "Continue" on the "Review your 1099-R info" screen
4. Answer all the questions and make sure you enter the net contributions prior to 2024 on the "Enter Prior Year Roth IRA Contributions" screen (include the 2023 excess contribution here)
5. On the "Do you have any Excess Roth Contributions" answer "Yes"
6. On the "Enter Excess Contributions" screen enter the total excess contribution from 2023.

To clarify, was the $8,000 contribution for 2024 also an excess contribution? Did you request the withdrawal plus earnings for this excess? Do not take just a regular distribution, your financial institution has a special form to request the withdrawal of excess contributions plus earnings. 

[bpbrun64]

I have been trying to figure what my MAGI is for 2024 so that I can I can have that withdraw happen, hopefully before April 15 . Since MAGI was raised to 230,000 for 2024, I am only slightly over that so far. I am trying to figure out how 2023 mistake is impacting 2024 first before I can make that happen. 

[DanaB27]

Please note, if you do have an excess contribution for 2024 and are in the phaseout range then the earnings from the withdrawal of excess contributions plus earnings will increase your MAGI. Therefore, you might have to withdraw a bit extra to avoid creating a new excess contribution when you add the earnings to your 2024 return.

Please see What if I made an excess Roth IRA contribution for additional information.

[bpbrun64]

I figured out to amend my 2023 return with the Roth Overpayment.  The only problem is that is says I have to print and send in with payment my 1040-V Form.  When I print out the Federal Taxes from 2023, it does not include a 1040-V. Will one be created when I efile?  What do I include in my 2023 tax payment envelope if I cant get this 1040-V printed?

[AmyC]

You should be seeing the form and able to print. I don't recommend mailing the payment. You are better off to make Payments safely online.

If you want to print a blank, Form 1040-V, Payment Voucher for Individuals.

Be sure to mail with tracking but no signature required.

[bpbrun64]

I e-files and assumed it sent the correct documents. It’s already been accepted by IRS. 

[bpbrun64]

You had mentioned that the 1009-r was coded incorrectly with T (regular distribution).  What should it have been coded with to show withdraw of over payment to Roth as well as the interest earned from it? I am assuming the earnings should be taxable, and impact MAGI for this year, but the removal of overpayment should not be taxable since I already paid the 6% penalty for it? Do I need to have financial institution recode it correctly, and if they do, does that now roll into 2025? If I know the correct code and the interest portion, can I just change the code in the return? Looking to wrap up this mess. 

[DanaB27]

No, since you removed the 2023 excess after the 2023 due date and you are over 59 1/2 code T for the regular distribution is correct. When you remove an excess contribution after the due date then you can leave the earnings in the account.

@bpbrun64