Excess Roth IRA Contribution - Removal and Reporting Help Needed

[cl020202]

If I contributed an excess of $3,500 to my Roth IRA in 2024, but did not realize until March 2026, how do I report this on my 2024 and 2025 taxes? I assume the first step would be to have my custodian remove the excess contribution and associated gains, but from there what would the proper course of action be? My understanding is it would be as follows:

1. Amend my 2024 tax return, by reporting the excess $3,500 in contributions, then the TurboTax software will likely have me fill out form 5329 in order to pay the 6% excise tax; I also believe I will need to input the info I would likely see on my 1099-R form in order to have my amended 2024 tax return reflect the earnings related to the excess contribution removal, though I will need to calculate this (specifically the NIA) myself as I don't think I will I will receive the 1099-R until later in 2026/2027, but the info should just be the earnings, total amount returned, and inputting codes P and J (I also believe that assuming I input the form 1099-R info correctly, I can disregard the form once I receive it given I have reflected it in my amended 2024 taxes)

2. Once I have successfully and correctly amended my 2024 tax return, and it has been processed/accepted by the IRS, I can then file my 2025 taxes, which should i) also include a form 5329 in order to pay the 6% excise tax as I didn't remove the excess until after 12/31/25 and ii) should reflect the info from the processed/accepted amended 2024 taxes

3. Once I have successfully amended my 2024 tax return and file my 2025 tax return, I should be all good and will no longer have to pay the 6% excise tax given at 12/31/26 there will no longer be an excess present nor will I have to make any other retroactive corrections, and I should be good for the 2026 tax year

Any advice/corrections/clarifications/answers to the above would be much appreciated, that way I can correctly go about doing all this in TurboTax and not have any more issues going forward. Thank you!

[DanaB27 · Accepted solution]

You will request a regular distribution without earnings since you are past the due date of the 2024 return. 

1. If you didn't pay the 6% penalty on your 2024 return then you will need to amend it to enter the Roth IRA contribution. Then TurboTax will automatically calculate the 6% penalty.

No, you do not need to add Form 1099-R with code PJ this is only if you remove the excess before the due date of the return.

2. You do not need to wait until the 2024 amened return is processed, you can file the 2025 return now. You will need to pay the 6% penalty on your 2025 return. Please see these steps:

1. Click on "Search" on the top right and type “IRA contributions”
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. On the "Did you contribute more to a Roth IRA than was allowed in 2024 or any previous year?" answer "Yes"
5. On the "Enter your excess Roth IRA contributions made in 2024 or prior years" screen enter the total excess contribution from 2024 (if it wasn't carried over).

3. Yes, you will get a 2026 Form 1099-R with code J (assuming you are under 59 1/2) in 2027 and once you enter this into your 2026 return the excess contribution will be resolved. Please make sure that you included the excess contribution amount when TurboTax asks you in the 1099-R follow-up questions about the prior year Roth IRA contributions.

[cl020202]

Thank you! Just a few more clarifying question(s):

1. I will need to amend my 2024 tax return - will the IRS bill me or is there an option for the amount to be taken out of my 2025 tax return/added to the 6% penalty on my 2025 tax return?

2. If I don't include the form 1099-R info I calculate on my amended 2024 tax return, but do include it on my 2026 return once I receive the actual 1099-R in 2027, is 2026 when I would be paying taxes on any of the earnings/NIA included on the excess contribution removal? I thought I would have to pay taxes on the related earnings somewhere in the process, and my assumption was I would be paying taxes through the 2024 tax return given those earnings are associated with the 2024 contributions/tax year

3. Will it just list code J on the 1099-R? I thought I read somewhere it would list P and J, but maybe that is related to the timing of the removal/distribution

Thank you for the quick response here, I really appreciate it!

[cl020202]

And one other question - when my custodian removes the excess contribution, will they remove just the principal, or the principal and any gains/losses? I know for Fidelity they automatically calculate any NIA and remove both the principal and any G/L, whereas I believe eTrade has the customer calculate NIA depending on the timing of the removal and when the excess contribution(s) took place - further to that, I assume form 1099-R will reflect the correct principal and G/L removed (distributed) from my Roth?

[DanaB27]

1. It is best to make the payment at the IRS website for the 2024 amendment. 

2. The earnings are allowed to stay in the Roth IRA since it is after the due date and your are paying the 6% penalty. You do not need pay taxes on the earnings. 

3. Yes, in your case it will be just code J (assuming you are under 59 1/2) since this is a regular distribution. You removed the excess after the due date, therefore it is a regular distribution with code J. Code P and J are only used if you request the withdrawal of the excess plus earnings by the due date.

You will remove the excess amount of $3,500 as regular distribution (ignoring any gains or losses) and they will distribute exactly $3,500. 

[cl020202]

Understood, two final questions from me:

1. When making the payment, I can just pay whatever the penalty is and the IRS will know? Or will TurboTax direct me to make the payment? Just want to make sure I don't misdirect the payment or end up having additional fees/interest accrue

2. Can I amend my 2024 taxes before the actual removal of the excess contribution takes place/settles, or should I wait until it has settled before proceeding? Just want to make sure I don't run ahead of my skis here in case any issues with my custodian or the excess contribution distribution

Thank you so much for the help, you're a life saver!

[DanaB27]

1. Yes, after entering all the information in the 2024 amended return you will see how much tax is due. You can pay this with the IRS website (best way), where you can select the year, or you can select within TurboTax to have the tax due withheld from your account. If the IRS charges any interest or fees they will mail you a notice after they processed your amended return and you can pay this on the IRS website.

2. Yes, you can amend 2024 now to add the 6% penalty. And you should pay the tax due as soon as possible.

[cl020202]

One final thing - you said I should request a regular distribution without earnings since I am past the due date of the 2024 return.

Is a requesting a regular distribution different from requesting a withdrawal/distribution of excess contributions? For example, on eTrade you can request a withdrawal from a Roth IRA as a "premature" withdrawal or a "excess contribution removal" withdrawal - based on that, would I choose the "premature" rather than "excess contribution removal", as you stated I am outside the 2024 due date., or should I choose the excess removal option?  Further to that, if I do the regular/premature distribution, how will the IRS know I no longer am in excess of my 2024 contributions? Or do my lifetime contributions just net out in the aggregate given I have lowered my total contribution amount? Just want to make sure I request the right type and correctly wipe out any "excess" for 2024

I really appreciate the help and responses here, thank you!!

[DanaB27]

Yes, you would choose "premature" withdrawal. 

The IRS will know that you removed the excess contribution when you enter the 2026 Form 1099-R on your 2026 return. This entry will go on line 20 of the 2026 Form 5329 and then resolve the excess contribution carried over from 2025 on line 18 of the 2026 Form 5329.

Next year, on your 2026 return after you enter all Form 1099-Rs you will click continue and then get a question about your prior Roth IRA contributions. Here you will include the excess contribution amount with any other Roth IRA contributions. You can withdraw contribution anytime tax- and penalty-free. Therefore, this distribution will be tax- and penalty-free.