Roth Excess Contribution Removal Over 59.5

[The G]

Hi, there's a lot of info on this, but I haven't found my specific scenario.  I have met the 5 year holding period (this account opened 2019), and I am over 59.5, and have not filed 2024 yet.  According to TurboTax, I had a 2024 overcontribution to my Roth of $6791.  I contacted E*TRADE and their calculation for the excess removal came out to $4141.96, negative earnings due to substantial loss, which was transferred to my regular brokerage account.   I am trying to create a 10-99R for 2025 and E*TRADE says the Box 7 Code will be PJ, but that triggers the early withdrawal.  How do I tell Turbotax I'm over 59.5 and the IRA is 5 years old?

Thanks!

[DanaB27]

If you made the contributions in 2024 for 2024 and withdrew the excess in 2025 then box 7 would be P and J (IRS).

1. Login to your TurboTax Account 
2. Click on the "Search" on the top right and type “1099-R” 
3. Click on “Jump to 1099-R”
4. Answer "Yes" to "Did you get a 1099-R in 2024?"
5. Select "I'll type it in myself"
6. Box 1 enter total distribution (contribution minus loss) $4,141.96
7. Box 2a enter the earnings $0
8. Box 7 enter J and P
9. Click "Continue"
10. On "Is the IRA/SEP/SIMPLE box on this 1099-R checked?" screen answer "No, the box is blank"?
11. On the "Which year on Form 1099-R" screen say that this is a 2025 Form 1099-R.

Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2023" but you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2024.

Yes, on the penalty screen during the IRA contribution interview you will enter $6,791 as withdrawn by the due date. 

[The G]

Why the J?  It's not an early distribution.  I've met the age and time and requirements and when I add the J, it doesn't give me an opportunity to correct that.  If I just put the P, it works out correctly.

@DanaB27 

[DanaB27]

Using only P would not be correct. Form 1099-R instructions state: "For the distribution of excess Roth IRA contributions, report the gross distribution in box 1 and only the earnings in box 2a. Enter Code J and Code 8 or P in box 7."

Generally, you won't pay the 10% early withdrawal penalty when you enter the earnings on the "Did you use your IRA to pay for any of these expenses?" screen under "Corrective distributions made before the due date of the return". The penalty only applies to the taxable earnings. You had $0 earnings and therefore you do not get this screen. TurboTax will not calculate the 10% early withdrawal penalty in part I of Form 5329.

[Edited 2/22/2025 | 7:22 am PST]

@The G 

[dmertz]

It's actually not possible to indicate that any amount is exempt from the 10% early-distribution penalty because only a taxable amount is subject to such a penalty.  Since the taxable amount shown in box 2a is zero, there is already no penalty to eliminate.

As to why code J is present in box 7, the code J is necessary to identify that the return of contribution is from a Roth IRA and not from some other kind of retirement account.  It's just a quirk of how the IRS requires the codes to be used and, when combined with code P or code 8, does not mean that the distribution is subject to an early-distribution penalty

[The G]

Thank you both!  Finally done.

@DanaB27 

@dmertz