How to report removal of excess Roth IRA contribution?

[srtadi]

I contributed $7500 towards my 2024 Roth IRA in Feb 2024 expecting that I would have the income to be eligible for it. At the end of the year (first week of Jan 2025) after I realized that I would not be eligible for it I had Schwab (where my Roth IRA account is held) remove the entire $7500 and the gains I had upto then as excess contributions. However, I still received the Form 5948 from Schwab in May 2025 showing that I had contributed $7500 towards Roth for 2024. I am yet to file my 2024 returns as I have filed for an extension.

My questions is - How do handle this on my 2024 tax returns ? Should I simply report $0 as my Roth IRA contribution since the excess was removed within the allowed period ? Or is there a form in TT to report the inital $7500 contribution and then the removal of it as an excess contribution ?

I am aware that I will recieve a 1099-R in 2026 for the gains/interest earned and that I will need to amend my 2024 returns at that time.

Thanks

[Opus 17]

If you know what the gains are, you can enter them now instead of amending later.  Create a substitute 1099-R with the total amount of the withdrawal in box 1, the taxable amount (attributable income) in box 2a, and use codes P and J in box 7.

Typically, most people would enter the Roth contribution, then be told by Turbotax that it is not eligible, and be recommended to remove it.  However, the result of doing that is that nothing is reported on the tax return, so you don't have to follow those steps if you don't want to.  Just leave the Roth off the return, and report the 1099-R now or later.  (Roth contributions are not reported unless they are un-removed excess.  There is nothing reported on the tax return that you made a Roth contribution if you later removed it within the deadline.)

The 5498 doesn't change because that's what happened in 2024.  If the IRS actually tries to reconcile the records (and there is some evidence that they don't bother even though they make it seem like they do) then the 5498 will be offset by the 1099-R with codes P and J. 

[srtadi]

Thank you for the prompt, clear and a comprehensive answer to my query. Much appreciated.

[user17711654561]

Do the same steps apply if the excess contribution was made in 2025 and the excess contribution plus gains were removed in February 2026, before our 2025 tax return was completed and submitted?  

I'm trying to figure out how to fill out Turbo Tax for 2025 for myself and my spouse (we learned that neither of us could contribute to a Roth IRA in 2025 in the process of filling out our taxes - we both removed the excess and all gains in Feb 2026).  

What steps do we need to take in Turbo Tax for our 2025 return so that we don't have to file an amended return when we get the 1099-R's next year (we were told by our financial institutions that 1099-R's will be issued in 2027 because we removed the excess plus gains in 2026)?

[user17711654561]

Or do you indicate no Roth IRA contributions for 2025 and claim the 2025 Roth gains removed as income on our 2026 taxes?  And what are the impacts to state (NY) taxes?

[Opus 17]

On your 2025 return, you must report the Roth contributions.  Turbotax will then say, "you have excess contributions, will you remove them before the tax deadline?"  Answer Yes.

The withdrawn contributions are not taxable, but the gains are taxable, and they are taxable in 2025 since the contribution was for 2025, even though you did not actually get the money until 2026.

Then go to the retirement income section and enter a new 1099-R as if you received one (don't use the "substitute 1099-R" procedure, just pretend you got one.). Enter the total amount of the withdrawal in box 1, and the taxable amount (the gains) in box 2a.  Use codes P and J in box 7.

In January 2027, will get the actual 1099-R for this withdrawal, you will need to enter in on your 2026 return so the IRS computer can match it, but the codes will ensure that the gains are not taxed again. 

[Opus 17]

NY doesn't tax retirement income under $20,000.  I don't know if they will tax this, since it is not a normal withdrawal, but it a return of excess.  At worst, NY will tax the gains.  At best, they won't (depending on your other retirement income, of course).  There aren't any other penalties in NY. 

[user17711654561]

We just went through the above steps and TT doesn't ask if we removed the excess...and it's imposing the 6% penalty.  

[RogerD1]

If you have already removed the Roth contribution (plus the earnings on the contribution) from your account, you can remove the entry in TurboTax for the Roth contribution as there is no tax consequence for removing the contribution prior to the filing deadline.

You should report the earnings on the contribution this year.  You can create a 1099-R in TurboTax and  report the earnings you received in Box 1 and box 2a.  You will enter codes P and J for box 7.  After you enter that information, you will get a screen asking for the year of the 1099-R - it will be for 2026.  These earnings will not be subject to the 10% penalty, so in the "These situations may lower your tax bill", you can enter the earnings as "Corrective distributions made before the due date of return".  On a later screen called "Explain the return of contribution" you can put in a statement that you were not eligible for a Roth IRA contributions for 2025 and that you removed the contribution and earnings.

Edited 3/18/26, 9:31 AM PDT, @user17711654561, @srtadi, @sjacobs6, @CRTX 

[CRTX]

How did you calculate the interests earned from the excess contribution? Does "expert assist" option helps you with the calculation?

[RogerD1]

No, "expert assist" won't be able to help you with the calculation.

The guidance on how to calculate the earnings on the excess contribution can be found in IRS Publication 590-A.  There is a Worksheet 1-4 on page 32 of Publication 590-A that can be used to determine the earnings that will be taxable on the excess contribution.

You may also be able to get assistance from your IRA custodian on determining the earnings on the excess contribution and they will be able to use that information to determine how much money should be removed from your IRA.

[sjacobs6]

I'm in the exact same boat, except my excess contribution + gains removal is occurring in March and will be deposited into my brokerage account in same month, all prior to me filing my 2025 taxes.  Question.  In the guidance you gave, you said when creating the 1099-R, mark codes J and P, which makes sense.  but you also said click the IRA box.  For clarification, this is a Roth IRA, clicking on the ? next to the box, it says don't click it for a Roth IRA, only for a traditional, SEP IRA or Simple IRA.  to clarify, we shouldn't click on that box, is that correct?  Second question. I just want to confirm, even though this is a 2025 withdrawal, and I'm doing this before my 2025 taxes are filed, and the funds will be deposited in my account in March of 2026, you mentioned that we will get a 1099-R in Jan of 2027. that will show 2026 on it.  Just so I'm clear, Turbo tax asks what year is on the 1099-R that we created.  it gives two choices, 2025 or 2026.  if I'm not mistaken, the guidance is to choose 2026, not 2025, is that correct?  Then when I file 2026 taxes, include this 2026 1099-R info on that return?  Or, should I choose 2025 for the 1099-R I just created since even though the gains from the excess contribution were deposited into my account in march of 2026, the gains were from 2025?  

[RogerD1]

Yes, you are correct that the IRA/SIMPLE/SEP box should not be checked.  And yes, you will check that this 1099-R is going to be for 2026 - even though you are reporting these items on the 2025 return, the actual withdrawal occurred in 2026 and would be required to be reported by the IRA custodian on a 2026 1099-R.

No, you will not report the 2026 1099-R on your tax return for 2026 since it related to a 2025 event and was already reported on your 2025 return.  When you receive the 2026 1099-R for the excess earnings, simply file it with your other tax documents, but do not include it on your 2026 tax return.

[gatemode]

Hi @RogerD1, I have a similar question I need help with figuring out how to file. 

In 2025, just before filing for 2024 taxes, I opened a Vanguard Roth IRA and contributed the max amount $7000 for 2024, and $7000 for 2025 before filing, then a few days later when filing on TurboTax, realized that my income was too low and I was ineligible to do this. So Vanguard converted the Roth IRA to a standard brokerage account. I didn't receive any forms to submit regarding this, and was told by a family tax preparer to wait until filing for the 2025 tax year (I use TurboTax for myself though).

In January 2026, I received a form 5498 for year 2024 stating a contribution of $7000 (which was not reported on my 2024 filing), and a form 1099-R for year 2025 with a gross distribution of $13815 (I'm assuming since the stocks in the Roth IRA fluctuated and devalued a tad in the few days they were in there). 

So now I'm ready to file, and at the sections asking about IRA contributions for 2025, and asking about excess contribution withdrawals for 2025, what should I enter in these fields? Should I put $7000, $14000, something else? The account conversion from Roth IRA to standard brokerage took place in March 2025, before the 2024 taxes were filed. 

Thank you

[RogerD1]

So you made Roth IRA contributions for 2024 and 2025, but didn't have enough earned income to support the contribution, so the funds were withdrawn by Vanguard who then moved them to a brokerage account.

The 2024 Form 5498 reporting the IRA contribution that you made of $7,000 is correct as it is.  This will support the 1099-R distribution you received for 2025.

Both of your Roth contributions were removed from the retirement account and moved to a brokerage account.  You now have a 1099-R form that needs to get reported on your return.  You mentioned that the 1099-R is reporting a gross distribution in box 1 that is lower than the amount you had contributed to your Roth initially, which means there would be nothing taxable to you for this distribution.  Your 1099-R is likely showing a box 7 code of J for an early distribution.

Go ahead and enter the 1099-R in TurboTax.  Follow these steps after you have entered the data from the 1099-R:

1. You may get a question about box 2a or 2b being blank - it's OK if they are, just answer no to "Do you have info in Box 2a or Box 2b?" - you might have the total distribution box checked in 2b
2. You may then get a question about the IRA/SEP/Simple box being checked on the 1099-R? - it shouldn't be checked
3. "Did this money come from a Roth IRA?" - Yes
4. You'll get a screen "How your taxes are looking so far" - click Continue
5. The next question will be about state related deductions - if it shows up, check the appropriate answer and Continue
6. "Do any of these situations apply to you?" - None of these apply
7. "Did you roll over . . .?" - check I did something else
8. "Did you use the money you withdrew to buy your first home?" - No, I didn't
9. Click Done on the 1099-R screen
10. Answer the question about disaster distributions and then click Continue
11. "Owned Any Roth IRA for Five Years?" - No
12. "Roth IRA open on 12/31/2025?" - No
13. "Roth IRAs" - yes you did open a Roth IRA in 2024 or a previous year.
14. "Did you withdraw from your Roth IRA before 2025?" - No
15. "What were your Roth contributions prior to 2025?" - $7000
16. "Did you convert a traditional IRA to a Roth IRA before 2025?" - No
17. "Roth IRAs" - enter the $7000 contribution you made for 2024 here
18. "Value of Roth IRAs on 12/31/25" - 0

Next go to Deductions & Credits:

1. Scroll down to Retirement and Investments and select Traditional and Roth IRA contributions
2. Check the box for Roth IRA
3. Was the contribution a repayment - No
4. Enter your regular Roth IRA contributions - $7000
5. Did you recharacterize? - No
6. Did you open any Roth IRAs in 2024 or earlier - Yes
7. Did you withdraw from your Roth before 2025? - No
8. Roth IRA contributions before 2025 - $7000
9. Did you convert - No
10. Excess Roth IRA contributions in 2024 or prior years - $7000
11. Value of Roth IRAs on 12/31/25 - should be zero since Vanguard withdrew all the funds

If you follow these instructions, then line 4a on your 1040 will be $13815 for your total distribution and line 4b will have a 0 for the taxable amount.

Since you now have a brokerage account with Vanguard, you want to be sure to get all the tax forms related to that account - you may get a 1099 Consolidated that will report 1099-INT, 1099-DIV and 1099-B for any sales of securities you made from that account.