Earnings on 2024 Roth IRA raised MAGI on amended 2024 return and now I didn’t take out enough

[Ginawild]

Thank you in advance for your assistance.  I made a Roth IRA contribution of $7,000 in 2024.  At the end of the year I fell into the phaseout range and had an $1,120 excess contribution.  I removed that and the earnings of $398.   

As expected, in early 2026 I received a 2025 1099-R reporting the full withdrawal and the taxable amount, however when I amended 2024 the $398 earnings increased my MAGI.  The new excess was $1,400.  So $280 more than I removed.  So, I was correctly assessed the 6% penalty on the $280 on the amended return.  

my question involves the remaining $280 excess.  At this point I have to remove it, but believe I can do so without removing more earnings, thus no MAGI increase issue.  

It’s now March 2026. I’m wondering if I should be requesting a removal of additional excess or an actual withdrawal of prinicipal.  And then how that gets reported so the 6% penalty stops running.  I believe I’ll have another 6% for 2025, but not after that.  

So, if removed in 2026 will I get a 2026 1099-R next year (2027)?   And if so how do I report it?   Do I send in a separate 5329 or input to the 2027 taxes.  And if I request an actual distribution how does the IRS know it’s the $280 to

cover the excess from 2024.   I assume no 10% penalty is assessed as it’s a Roth.  

If I will get a 2026 1099-R to file next year can I create a substitute and report it this year, or should I wait? And how do I report it correctly?   File a 5329 now or include it in the tax return? 

I apologize for the length but without all

the info it would be hard to answer accurately.  Again, thank you in advance for any info you can provide.  

I use TT premier desktop 

Gina

[DianeW777]

Let's review. To confirm you actually removed $1,120 + $398 (taxable amount), for a total of $1,518 (full amount). It's unclear where the $280 is coming from. More detail for a better understanding will help. If it is an excess in earnings that, for some reason, was not removed with the original excess contribution, then it will be another 1099-R for 2026. 

If that is the case you should, take the distribution, report it on your 2025 tax return in the 1099-R you have or create a substitute 1099-R separately, and when you file your 2026 tax return the code in box 7, form 1099-R should be code P. You will not be taxed on it again. 

Statement: it’s now March 2026 and I have to report the 1099-r for 2025 as there was withholding, but the tax was assessed on the 2024 1040-X and is being paid.  

• The tax withholding will be applied to the 2025 tax return and not included in your 1040-X. When you amend the 2024, you will not include the withholding on that return since it was paid to the IRS for your 2025 return even though you are amending.
• Enter the 1099-R with Code P and enter the federal withholding in your 2025 tax return. None of the distribution should be taxed on your 2025 tax return since you are amending 2024. Complete Form 5329 and request relief of the penalty since you did take it out by the tax deadline in 2025.
• 6% Annual Penalty: The 6% tax applies every year the excess remains in the account.
• Avoiding the Penalty: Remove the excess contribution and its earnings by the tax deadline
  • What if I made an excess Roth IRA contribution because my income was too high?

@Ginawild 

[dmertz]

"At this point I have to remove it, but believe I can do so without removing more earnings, thus no MAGI increase issue."

Correct.  You must do this by obtaining an ordinary distribution of $280 from the Roth IRA, not a return of contribution, reported with code J, T or Q, not code P, on a 2026 Form 1099-R   Because this is a distribution of contribution basis, this ordinary Roth IRA distribution will not be subject to any income tax or early-distribution penalty.

The $280 will appear on line 20 on your 2026 Form 5329 to be subtracted from the $280 on line 18.  This excess will be carried forward from 2025 to 2026 when you transfer in your 2025 tax file to begin your 2026 tax return.

As you said, because the end of 2025 has passed, it's too late to avoid the 6% penalty on this $280 on your 2025 Form 5329 (unless you are eligible to treat the $280 as part of your 2025 Roth IRA contribution, in which case the excess would be resolved on your 2025 Form 5329).

[Ginawild]

Thank you for the response.  I did take a regular distribution of the $280 a few days ago.  Will just be paying that extra $17 but be clear for 2026.  I’ll be paying close attention to limits as we go.  If it hadn’t been in the phase out range it wouldn’t have been such an issue.  Just something to be mindful of.  

Fortunately,  it was only $280 short.  $17 for 2 years isn’t a big deal especially as I had a very good year in the market.  Still, it’s nice to avoid amending a return or any penalties.  So I’ll just be more careful at year end.  

[Ginawild]

By the way.  Just FYI.  After adding the $398 which increased the MAGI, the new excess contribution on amended return became $1,400.   The $1,400 less the $1,120 (excess computed on original return) = $280.  

you weren’t sure where that number came from, so I’m just expounding