Roth IRA

[MsSlowky]

After filing our 2024 return we found out that the Roth IRA contribution we made in 2024 isn't allowed due to our AGI being over the limit.  We removed the funds plus earnings from the account and received a 2025 1099R.  Do we need to amend our 2024 return and pay the penalty or wait until 2025 to file and claim the penalty then?   Thak you.

[fanfare]

If you timely filed ( April 15) you have until Oct 15 to remove the excess plus earnings, which you did, without penalty.

if the earnings were greater than Zero, that is a taxable amount to be reported on your 2024 tax return via Form 1040-X.

@MsSlowky 

Usually the true 2025 1099-R comes in February 2026. What are you looking at and what is the taxable amount shown?

[MsSlowky]

I've got a 1099 R for 2025 which shows the gross distribution (contribution + earnings) in box 1 and the earnings only on in box 2a.  I can amend 2024, but the 1099R is for tax year 2025 which would also be reported in tax year 2025 so it seems like a duplication.  The majority of the earnings would be for 2024, but there would be 4 months of 2025 earnings too.  I don't have separate 1099R's for 2024 and 2025 breaking out the earnings by year.   I was told we'd have a 6% penalty on the contribution error but I'm not sure if it should be in 2024 amended or 2025 tax year.  What are your thoughts?  Thank you.

[fanfare]

if the earnings Box 2a  were greater than Zero, that is a taxable amount to be reported entirely  on your 2024 tax return via Form 1040-X.

It is not usual to get a 2025 1099-R  now. Maybe the custodian is giving you a heads up as a courtesy.

It is probably not sent to IRS yet.

If the custodian is a bank it is not unusual for the bank to give you incorrect advice. There is no penalty if you filed  your 2024 tax return on or before April 15th, or you requested an extension of time to file and the ontribution was for 2024, not for 2023.

Please state the disitrbution code(s) in box 7 of this 1099-R and the amount in Box 2a.

[MsSlowky]

The 1099R is from a brokerage company and the codes are J & P and we did file our 2024 return by 4/15/25.  So it sounds like we need to amend our 2024 return since box 2a is greater than zero.  However, box 1 on the 1099R includes the Roth contribution plus the earnings, yet the Roth contribution monies are after tax.  It seems like the 1099R I received is incorrect since the monies for the contribution were not pre-tax and shouldn't be included as a distribution.  The monies were a distribution but not income.  Do you agree?  Thank you.

[Opus 17]

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@MsSlowky wrote:

The 1099R is from a brokerage company and the codes are J & P and we did file our 2024 return by 4/15/25.  So it sounds like we need to amend our 2024 return since box 2a is greater than zero.  However, box 1 on the 1099R includes the Roth contribution plus the earnings, yet the Roth contribution monies are after tax.  It seems like the 1099R I received is incorrect since the monies for the contribution were not pre-tax and shouldn't be included as a distribution.  The monies were a distribution but not income.  Do you agree?  Thank you.

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No, this is correct.  It's unusual to get a future 1099-R like this, but the amounts and code JP are correct.

You have to remove the excess contributions and the attributed earnings.  The total withdrawal is reported in box 1, that's just the rules.  Only the attributed earnings should be in box 2a, and only the earnings are taxable.  In addition, even though this is an "early" distribution from a Roth IRA, the earnings are not subject to the additional 10% penalty on early withdrawal because it is part of a corrective distribution.

The attributed earnings are taxable in 2024, so you need to file an amended return.  Enter the 1099-R as-is.  You should only be taxed on the earnings in box 2a, you are not taxed on the amount in box 1. 

[MsSlowky]

Thank you for your help with this.  I greatly appreciate it.  Take care.