Excessive Deposit into my Roth

[MHeslop37]

After I filed my 2023 taxes via Turbo Tax Deluxe in February 2024, I deposited $7500 into my Roth for 2023 and $8000 into my Roth for 2024 on April 1 before the 2023 tax deadline of April 15, 2024. In May I received a 2023 Form 5498 from Vanguard for the $7500 deposit.

In mid-December 2024 I realized I was not allowed to put any money into my Roth since I’m retired and not working. As such, Vanguard withdraw both the $7500 and the $8000 plus the gains made during the 2024-year on December 27, 2024.  Since then I received a Form 1099-R for 2024 (in mid-January 2025 from Vanguard) for the $8000 (in box 1) and the gains (in box 2a), with distribution codes 8, J. No mention of the $7500.

Since Vanguard issued a Form 5498, I believe I need to file an Amendment Return for 2023 indicating the excessive funds ($7500) was returned. Since all funds were deposited in 2024, there was no gains in 2023. Question becomes, do I need to file a 2023 Amendment Return, and Do I then make up my own Form 1099-R 2023 (or 2024), what would the distribution code be?

[fanfare]

return of excess contribution:

before tax filing date including extension: positive earnings allocable to the excess are included in income on 1040 Line 4b for the year of the contribution. negative earnings are ignored; in any case, for purposes of basis, consider the original contribution amount as returned.

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I think Vanguard still owes you a 1099-R for the $7,500 that you say was also returned to you

[Opus 17]

How old are you?

The procedure to remove the excess from 2023 is different than 2024, because you are after the 2023 deadline (October 15, 2024).  You need to do this before you file your 2024 return because you will need form 8606 and form 5329 from the 2023 return to prepare the 2024 return.

For 2023, you must file an amended return to report the $7500 excess contribution, and pay a 6% penalty tax.  Then, to remove the excess $7500, you simply make a regular withdrawal of $7500 (which you already did).   It's not taxable because it's a Roth, unless the Roth account is less than 5 years old or you are under age 59-1/2.  You do not need to remove the excess attributable to the $7500.

I'm not sure why Vanguard did not include the $7500 on a tax statement, but you can create a substitute form 1099- using code Q (if you are qualified) and code J if you are not.  @dmertz  any thoughts?  But it is reported on 2024, not 2023. 

For the 2024 contribution, you are correct that you must remove the contribution by April 15, 2025 (which you did) and you must report the earnings attributed as 2024 income.   

[fanfare]

Vanguard has not yet sent out all 1099-R documents for this tax year.

[MHeslop37]

Thanks Champ, I'm 78 years Old...

[MHeslop37]

fanfare,

Thank you, I received one of my 1099-R related to my Roth, sounds like I better just wait until after January before I start any tax figuring... Maybe they will send me another 1099-R relating to the $7500, as the first one they did send only relates to the $8000. Thanks for the feedback...

mheslop

[MHeslop37]

Fanfare,

Thanks, I was hoping Vanguard would be posting another 1099-R for the $7500, but wasn't sure, as I said I'd better wait until after January before proceeding with this tax stuff...

I already started my Turbo Tax 2024 (I didn't complete it) before I became aware of what I did wrong (over deposited money into my Roth), I'm now thinking I should delete the Turbo Tax 2024 that I started and not start again until after I complete the Amendment Return for the 2023.  In this way, when Turbo Tax 2024 imports the information from Turbo Tax 2023 (including the Amended Return information), the 2024 information will be accurate, etc.  What do you think...???

mheslop

[Opus 17]

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@MHeslop37 wrote:

Fanfare,

Thanks, I was hoping Vanguard would be posting another 1099-R for the $7500, but wasn't sure, as I said I'd better wait until after January before proceeding with this tax stuff...

I already started my Turbo Tax 2024 (I didn't complete it) before I became aware of what I did wrong (over deposited money into my Roth), I'm now thinking I should delete the Turbo Tax 2024 that I started and not start again until after I complete the Amendment Return for the 2023.  In this way, when Turbo Tax 2024 imports the information from Turbo Tax 2023 (including the Amended Return information), the 2024 information will be accurate, etc.  What do you think...???

mheslop

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You can't finish 2024 until you amend 2023, so you at least need to pause 2024.   You could add the information manually if you don't transfer it.  It depends on whether you think it would be more convenient to clear and start over, and have to re-enter things you already entered (but the IRA condition carries over for you) or stay where you are so you don't have to start over but you do have to add the IRA situation manually.

Either could work, it's up to you.