Hi there, One more follow-up question:
Context: I had made $7000 Roth IRA contributions for 2024 and 2025 without realizing that there is a income limit of $150,000. (for single)
As per earlier suggestion, I called Fidelity and submitted the form to return my $7000 contribution made to Roth IRA in Jan 2024 + $801.85 earnings = $7801.85 . (I will do the same after it gets processed to submit request for return of my contributions of $7000 made in Jan 2025 for my 2025 Roth IRA with loss of $86 in 2025.). I hope I am on the right track now.
Questions:
1) I understand that I may have to pay taxes for the $801.85 earnings, but will I also have to pay any penalties? (I am 27 years old) . Would it be: IRS distribution - taxable = $802, IRS distributions -nontaxable = $7000?
2) Should I click Yes or No for below ? Because I did not exceed $7000, it's just that I did not realize that I was not eligible to contribute.
3) Is it ok to click No below as I did not withdraw before 2024 and only for the contribution made in 2024?
4) Please confirm if it is ok that I changed below to $0 as I am withdrawing this contribution
5) I clicked No for below as I think it is not a repayment.
6) Finally, please confirm what should I look for to ensure that I have entered everything properly.
Thanks a lot for your guidance!
1. $802 earnings are taxable, $7,000 not taxable as they are withdrawals of Roth IRA contributions.
2.The answer should be No as you withdrew the excess contribution.
3. The answer is No
4. You should 0 as the excess contribution has been withdrawn.
5. The answer is No.
6. On your 2024 tax return, answer that the 1099-R with code PJ is for 2025.
[Edited 03/10/25 | 12:00 PM PST]
@jackkgan I have edited point 6 above.
1. $802 earnings are taxable, $7,000 not taxable as they are withdrawals of Roth IRA contributions.
2.The answer should be No as you withdrew the excess contribution.
3. The answer is No
4. You should 0 as the excess contribution has been withdrawn.
5. The answer is No.
6. On your 2024 tax return, answer that the 1099-R with code PJ is for 2025.
[Edited 03/10/25 | 12:00 PM PST]
@jackkgan I have edited point 6 above.
Thanks so much again MinhT1
I just noticed the following sentence in your post. By any chance did you mean that I should amend my previous year 2023 tax return?
I entered 1099-R myself with the following entries for 2024, Please confirm if below are correct and if this what you meant by 2023? (I understand that though the drop down says 2023 , it would be for 2024 from a previous post)
["Include the earnings in income for the year in which you made the contributions, not the year in
which you withdraw them."]
You have to amend 2023 tax return.
For 2024 contribution that lost money, negative earnings are ignored.
Thank you. I made the excess contributions to Roth IRA in 2024 and not in 2023, because, I had contributed $7000k in Jan 2024 to Roth IRA when my income my low and when I switched jobs to a higher paid job in March 2024, my income went above $150k. Hence the problem.
Meaning, my income in 2023 was < $150k but was > $150 k in 2024 .
Please help me understand if you think I would still need to amend my 2023 return.
Also, the earnings from the 2024 contributions was $802, it was not a loss. I understand that I have pay tax for just the earnings as I now placed the order withdrew them as well. Thank you
do you have a 2024 1099-R with code PJ ?
if yes, you have to amend your 2023 tax return
The quote is straight from the IRS Pub. I admit it is confusing.
But the Code PJ pulldown you posted says it right there.
I misspoke about your later contribution that you said had a loss.the taxable amount on the 1099-R will be Zero.
In oher words, you can file 2024 tax return now without being in the amend situation that you are in now with your 2023 tax return.
As far as I understand, my issue is only with my contribution to Roth IRA in 2024 as my income went up > $150 in March 2024. So I placed the request to withdraw the $7000+ earnings in 2024 am trying to enter the values for 1099-R myself for 2024 as I won't receive that until later. So I guess I may not have to amend 2023. Please confirm if you still think I need to amend 2023.
As far as the loss I had mentioned, it is for the 2025 for which I had made a similar mistake of contribution in Jan 2025. I will withdraw that next, so I will have to take care of that in 2026.
MinhT1 corrected the point 6 above that caused the confusion for you. I did not read your original post correctly..