Excess Roth IRA

[dgh03]

Hello!

So I just filled my taxes and I was informed by turbo that I had an excess of $6,000 that I put toward my Roth. It showed I would owe $355. I am not 60 years old and I’ve only had the Roth for a year. How do I not pay the $355 and also not get taxed on getting the extra money out of the Roth? Also how do I get the money out? I use t Rowe price for my Roth.

[DanaB27]

If you made an excess contribution to the Roth IRA because of you MAGI then you can either recharacterize your Roth IRA as a traditional IRA or request the return of excess contribution plus earnings by the due date.  If you have an excess contribution for other reasons then you will have to request the return of excess contribution plus earnings by the due date to avoid the 6% excess contribution penalty.

If you choose to return the excess contribution then the earnings for an excess contribution made in 2024 for 2024 are taxable on your 2024 tax return and you will receive a 2025 Form 1099-R with code P and J. This will have to be entered on your 2024 tax return. 

1. Click on the "Search" on the top right and type “1099-R” 
2. Click on “Jump to 1099-R”
3. Answer "Yes" to "Did you get a 1099-R in 2024?"
4. Select "I'll type it in myself"
5. Box 1 enter total distribution (contribution plus earning)
6. Box 2a enter the earnings
7. Box 7 enter J and P
8. Click "Continue"
9. On "Is the IRA/SEP/SIMPLE box on this 1099-R checked?" screen answer "No, the box is blank"?
10. On the "Which year on Form 1099-R" screen say that this is a 2025 Form 1099-R.
11. Click "Continue" after all 1099-R are entered and answer all the questions.
12. Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings under "Corrective distributions made before the due date of the return".

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.

To remove the 6% penalty from your return:

1. Click on "Search" on the top right and type “IRA contributions”
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. Continue until the penalty screen and enter the excess contribution amount withdrawn.

If you choose to recharacterize your contribution then please see  How do I re-characterize a Roth IRA contribution as a traditional IRA contribution in TurboTax?

If you already filed your return then please see How do I amend my federal tax return.