how to handle Excess IRA contribution for 2025 in turbota

[user08181992]

I contributed to a SEP IRA in 2025 (which is like a traditional IRA) and determined I made an excess contribution.  I directed my financial institution to remove the excess contributions plus earnings on it, which they did in 2026.  I understand that the financial institution will issue a 2025 1099R for this as a distribution but they wont issue until 2026.  I read another post that said in this situation, you can add a 1099R in turbotax for 2025, report the gross return of contribution plus earnings  in Box 1 and the taxable earnings in Box 2.  I also read to use a distribution code of P. or PJ if it is a Roth, which in my case it is not  I did this in turbotax but code P is labeled as an excess contribution plus earnings that is taxable in 2024, not 2025.  And when I entered the new 1099R with code P it did not add taxable income for 2025.  Is there a way to report this for 2025 tax return in turbotax ?  Or do I need to wait until the financial institution issues the 2025 1099R next year and then file an amended 2025 return?

[guywong]

The financial institution should be issuing you a 2025 1099-R with a Code 8 in Box 7, "Excess contributions plus earnings/excess deferrals (and/or earnings) taxable in 2025"

[ReneV4]

A SEP IRA is not the same as a Traditional IRA, in that a SEP contribution should be entered as a business expense.

Here is more information on how to enter your SEP contribution in TurboTax, Where do I enter my SEP IRA contributions?

Note that you will need to enter your SEP contribution information after you have entered your business income information.

Once you have entered your SEP contribution, TurboTax will alert you about the excess contribution, as well as the total to withdraw.

The next step is to report the distribution for this excess contribution using a mock Form 1099-R. This will be reported as personal income.

1. Go to Wages & Income, Retirement Plans and Social Security (1099-R), then Start
2. Enter your 1099-R details, with the gross distribution in Box 1 and the earnings in Box 2a
3. Select Code 8 for Box 7
4. Check the IRA/SIMPLE/SEP box
5. Where is your distribution from?, Select last circle "Pension...None of the above", then Continue
6. Check the, "This is for a SEP IRA" box, then Continue
7. Enter information about the value of your IRA, then Continue

When your Form 1099-R arrives in 2026, it should be coded with a P in Box 7, which will reflect the above and you will not need to report it.

Learn more by reading, SEP plan Fix-it Guide - Contributions to the SEP-IRA exceeded the maximum legal limits