Wrong request for excess contribution removal

[mpapadop]

Hello, I recently made wrongly a request for excess contribution removal from my Roth IRA account.

I got confused about the Roth IRA and Roth 401k contribution limits, since I thought they share the same max limit of $6000 (in 2022).

In 2022 I contributed the max $6000 in my Roth IRA and I also contributed $1900 in my employer's Roth 401k. So I thought I overcontributed in 2022 in my employer's Roth 401k the amount of $1900 and made a request to Vanguard to remove this excess contribution from my Roth IRA. But apparently I was wrong since they share different max limits.

I called them today to cancel this request and they told me that the cannot cancel this requet and on January 2026 I will receive a 1099-R for this and a check with the excess amout distributed. So I'm going to receive a 1099-R for an overcontribution that I never made.

Here's my questions:

a. Should I ignore this 1099-R and never import it in my taxes next year? I understand that I have to pay a penalty of 6% for each year (2022, 2023, 2024 and 2025) of this $1900 amount if I enter it in my tax return for something I never did.

b. What is the way I should treat this mistake?

c. They money that I wil lreceive back can be contributed again in my Roth IRA 2022 plan?

[dmertz]

Because the Roth IRA contribution was a contribution for 2022, the only type of distribution that was permitted to be made from your Roth IRA with respect to this distribution is an ordinary distribution which would be eligible for rollover should you choose to do so (assuming that it would not result in a violation of the one-rollover-per-12-months limitation).  However, it's also possible that Vanguard has processed a return of contribution before the due date of the corresponding tax return, which would only be permissible if what they were returning was a separate Roth IRA contribution made for 2024 or 2025, in which case the distribution would not be eligible for rollover (but would leave open the possibility to make a new contribution for that year).  Vanguard reps have been known to confuse returns of contributions after the due date of a tax return with returns of contributions before the due date of the tax return.

To be sure what sort of distribution you received, you'll need to ask Vanguard.

There should be no delay in you receiving the check.  Only the issuance of the Form 1099-R is delayed until January 2026.

[mpapadop]

So assuming that this amount wont be contributed again since I already max out contribution for the current year... for this $1900 I will have to pay 6% penalty for the 2022, 2023, 2024 and 2025 because I request a contribution removal?

Is there something I can do, not paying any penaly or tax since in reality I never overcontributed since the Roth IRA and Roth 401k are different accounts sharing different limits?

[dmertz]

There would be no tax or penalty on an ordinary distribution from your Roth IRA because it would be a distribution of contribution basis reportable on Part III of Form 8606.

If Vanguard instead mistakenly processed a return of $1,900 of your 2024 Roth IRA contribution (which would not surprise me), any attributable gains accompanying the $1,900 would be taxable but not subject to penalty.