Excess Contribution on 2023 & 2024

[user17721303397]

I open my Roth IRA on Sep 2021 and made contribution eary of each year.

On 2023, I made contribution on Feb 2023 as usual.

During tax season ( April 2024), I realized that my contribution is limited due to additional income(actually tax SW indicate excess contribution and thus add form 5229 include 6% penalty). It was bit late and thus filed 2023 tax. After I simply remove the excess amount from my Roth not through Fidelity ( 2nd mistake).

once again on Jan 2024, I made 2024 contribution. 

At the end of 2024 (early of 2025) I receive 1099R with code of T. I googled the code of T and realized ( assumed) that Fidelty handle this removal as withdraw.

Again bit late, I decided 2024 tax file first and remove properly. While tax filing, I again learn excess contribution on 2024.

On April 2025, I remove the 2023 excess via Fidelity.

On May  2025, I remove the 2024 excess via Fidelity.

At the end of 2025 ( early 2026), I received two 1099R with code of PJ(2024 removal) and T(2023 removal).

In 1099R with PJ, I see $163.75 in Item 2a - Taxable amount. 

What steps should I have to do before 2025 tax filing?

2024 amendment is needed? 

2023 excess is properly removed?

 

[DanaB27]

The 2025 1099-R with codes PJ belongs on your 2024 return and you will have to amend your return. You do not need to add Form 1099-R with code PJ on your 2025 return unless there is Box 4 Federal Tax withholding and/or Box 14 State withholding. Then you must enter the 2025 Form 1099-R with code PJ into the 2025 tax return since the withholdings are reported in the year that the tax was withheld. The 2025 code P will not add anything to your income in the 2025 tax return but the withholdings will be applied to 2025.

Yes, you removed the 2023 excess contribution but it seems you removed the 2023 excess twice with a regular distribution? Generally, you use a regular distribution (without earnings) when you remove the excess after extended due date (Oct 15th). In this case you pay the 6% penalty until the distribution dissolves the excess contribution. The 2024 Form 1099-R with code T (received in 2025) should have resolved the 2023 excess contribution on your 2024 return.
 

You will enter the 2025 Form 1099-R with code T on your 2025 tax return.

[user17721303397]

Thank you so much for detail explanation DanaB27

About "The 2024 Form 1099-R with code T (received in 2025) should have resolved the 2023 excess contribution on your 2024 return", I have filed 2024 Form 1099-R with code T but not sure, it resolved the 2023 excess. Is there a way to verify?

When I check 2024 tax return file again , I see Form 5329(Item 18, 20, 21 : 2023 contribution amount, Item23, 24 : 2024 contribution amount, Item 25 : penalty) and 8606(Item19 & 21: 2023 contribution, Item22: 2024 contribution amount ). 

In addition, when I check 2023 tax return file, I see Form 5329(Item 23, 24: 2023 contribution, Item 25 : penalty) only.

When I enter 2025 Form 1099 with code T on my 2025 tax file, what form do I expect? Both 5329 and 8606 or only Form 5329

[DanaB27 · Accepted solution]

You removed the 2024 excess plus earnings in May 2025 before the extended due date (October 15, 2025). Therefore, you should have removed the Roth IRA contribution for 2024 from your 2024 return or indicate on the “You currency have a penalty” screen, at the end of the IRA interview, that you withdrew the contribution. You should not have any penalty showing on line 25 of your 2024 Form 5329.

To confirm, you had the Roth IRA less than 5 years in 2024? If yes, then you will have Form 8606 part III filled out. Line 22 should include all your prior year Roth IRA contributions including the excess 2023 contribution. It won’t include the contribution for 2024 since you removed it plus earnings before the extended due date.

When you enter the 2025 Form 1099-R with code PJ in your 2024 amended return make sure you click continue after you added all Form 1099-Rs:

1. On the “Enter Prior Year Roth IRA Contributions” screen enter all your prior year contributions to the Roth IRA including the 2023 excess contribution
2. Continue through the questions until you get the “These Situations May Lower Your Tax Bill”, here you enter the earnings from box 2a from Form 1099-R with code PJ under "Corrective distributions made before the due date of the return".

Your 2023 return seems correct.
 

On the 2025 return you should not have Form 5329. If you had the Roth IRA less than 5 years in 2025 then you will have Form 8606 part III filled out.

[user17721303397]

Thanks again for all additional information. 

At least how to handle 1099R with code PJ is clear - 2024 amendment is needed. 

I filed 2024 tax report at the last date AND before removal of 2024 excess . Thus I believe I see Form 5329 in 2024 tax report?

I have open my Roth on 2021 

Back to my previous question - About "The 2024 Form 1099-R with code T (received in 2025) should have resolved the 2023 excess contribution on your 2024 return"

Is this still valid? In other word, 2023 excess is already removed?

The reason for this question is related to the 1099R with code T that I received in 2026. 

I thought 1099R with code T that I received in 2025 is NOT removal of excess but regular withdraw and 1099R with code T that I received in 2026 is Removal of excess. The reason for this interpretation is following

In 2024, I simply withdraw excess amount by myself. I did not use Fidelity system - I believe I did not tell Fidelity that I remove the excess.

In 2025, I used Fidelity system - Return of Excess. Thus I clearly tell Fidelity I remove the excess.

I have called Fidelity and asked why I did not received code PJ ( for 2024 Return of excess). They told it is called "untimely return of excess" 

Anyway could you explain one more time how to handle 1099R with code T today. Any care should I take? 

[RobertB4444]

That code T indicates a taxable distribution.  You should contact the folks at Fidelity and request a corrected 1099-R.  Otherwise the IRS will quite rightly expect you to pay taxes on the withdrawal of excess contributions.