topic Re: ROTH conversion in Retirement tax questions

ROTH conversion

Hebb — Wed, 05 Feb 2025 15:21:17 GMT

I mistakenly converted all my 2024 RMD directly to Roth IRA, How do I fix this mistake?

Re: ROTH conversion

SusanY1 — Wed, 05 Feb 2025 15:37:04 GMT

To correct this mistake, call the company or bank that holds your Roth IRA and tell them that you need to request a "return of excess contribution". This will allow them to return the funds (plus any earnings on those funds) to you with the proper reporting of the transaction. Be sure to request this prior to the tax filing deadline of April 15 in order to avoid any penalties for the contribution.

If you have withdrawn it, or will withdraw it, before this deadline you can enter data into TurboTax as if it never happened. You will receive a 1099-R in 2026 to report the transaction on your 2025 tax return, but it shouldn't cause any tax issues for you in either year.

Re: ROTH conversion

Hebb — Sat, 08 Feb 2025 14:42:45 GMT

Thank you for the quick response. Vanguard returned the excess ROTH contribution plus earnings. I want to know is my excess earnings be reported as Capital Gains on my 2024 tax return?

Re: ROTH conversion

DianeW777 — Sat, 08 Feb 2025 14:49:10 GMT

No. The excess earnings from a retirement account will be reported as ordinary retirement income. It will not receive capital gain treatment due to the nature of the retirement guidelines.

@Hebb

Re: ROTH conversion

Hebb — Sun, 09 Feb 2025 17:06:44 GMT

Thank you. If I understand you correctly the excess earnings should be recorded as taxable IRA distributions.

Re: ROTH conversion

RobertB4444 — Mon, 10 Feb 2025 22:27:21 GMT

Yes. You can enter it as though you had received a 1099-R for the distribution that you got back. Enter the 1099-R with the name and address of the financial institution and then the total amount that you received in box 1. In box 2a put only the earnings that you received - that is the only amount that is taxable. In box 7 you will enter code 8.

Next year you should receive a 1099-R with this exact information on it. You should ignore that when you get it since you will have already entered it onto this year's return.

@Hebb