Incorrect treatment and calculation of excess 2025 Roth contribution in TurboTax Online

[lionintexas]

I have been going in circles on TurboTax Online trying to get it to properly treat and calculate my excess 2025 Roth IRA contribution on Form 5329.  I have already withdrawn the excess contributions, but Online is not letting me reflect this on my 2025 tax forms without having a 1099-R (which in Box 7 you use Code 8 to indicate return of your excess contribution).  I won't ever receive a 2025 1099-R because I withdrew my 2025 excess contribution in Feb 2026.  I will get a 2026 1099-R in January 2027, which I should have to do nothing with but file it away.  I should be able to file my 2025 taxes and report that I withdrew my 2025 Roth IRA contribution on time and report and pay taxes on the earnings I made on the excess contribution through December 31 and not have to pay a 6% penalty this year.  BTW, I believe it is also incorrectly calculating and displaying your excess contribution if you are married, filing jointly.  So not only does it access the 6% penalty, but it assesses it on the wrong amount.

I asked 20 questions in the help portal on the right to try to get guidance, but it keeps telling me I must pay the 6% penalty on my excess 2025 Roth IRA contribution NOW, then file a 2025 amended return next year to (hopefully) get the penalty back next year.  This is not per IRS rules, and simply incorrect.  If you withdraw the Roth IRA excess contribution before the 2025 filing deadline (April 15, 2026) you are not subject to the 6% penalty on your excess 2025 Roth IRA contribution......ever.  It does tell me correctly to not enter a manual 2025 1099-R because I will get a 2026 1099-R next year.  But there is no way to tell it not to impose the 6% penalty on Form 5329.  So, I keep going in circles.  CoPilot AI tells me the only way to file a correct TurboTax 2025 tax return is to use Desktop where I can manually correct the forms and worksheets to be correct.  This is ridiculous.  Online needs to be fixed.

[AnnetteB6]

First, you should report the Roth IRA contribution in TurboTax because you will be given the options onscreen for what you intend to do to correct the excess contribution.  Once you have indicated that you will remove the excess before the due date of your return, there will not be any 6% penalty imposed.  

When entering the Form 1099-R for a return of an excess Roth IRA contribution plus earnings you need to use code J with code P.  Code P will say in the drop-down menu that it is taxable in 2024, but follow-up information will indicate that it is taxable in 2025 instead.  

Since you made the excess contribution in 2025 and withdrew the 2025 excess Roth IRA contribution plus earnings in 2026 before the due date, then you will get a 2026 Form 1099-R in 2027 which should have codes P and J.  This 1099-R will have to be included on your 2025 tax return and you have two options:  

• Amend your 2025 return after you actually have your 2026 Form 1099-R in hand. 

OR

• You can report it now in your 2025 return and ignore the 1099-R when it comes unless there is Box 4 Federal Tax withholding and/or Box 14 State withholding.  Then you must enter the 2026 Form 1099-R into the 2026 tax return since the withholdings are reported in the year that the tax was withheld.  The 2026 code P will not do anything to the 2026 tax return income but the withholdings will be applied to 2026.

If you wish to report the Form 1099-R now as part of your 2025 return without amending it later, go to the use these steps:  

• Go to Wages and Income > Retirement Plans and Social Security > Form 1099-R section of your return to add a Form 1099-R
• Select "I'll type it in myself"
• Box 1 enter total distribution (contribution plus earning)
• Box 2a enter the earnings
• Box 7 enter J and P
• Click "Continue"
• On "Is the IRA/SEP/SIMPLE box on this 1099-R checked?" screen answer "No, the box is blank"?
• On the "Which year on Form 1099-R" screen say that this is a 2026 Form 1099-R.
• Click "Continue" after all 1099-R are entered and answer all the questions.
• 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".

See the following TurboTax help article to learn more:

What happens if I made an excess Roth IRA contribution because my modified adjusted gross income is ...

[lionintexas]

Thank you for your response. However, I had tried everything that you mentioned in TurboTax Online. After I entered the original contribution and indicated that I would remove the excess prior to the text deadline, TurboTax still applied the 6% penalty on my tax form.  Eventually, TurboTax started skipping those Roth IRA sections altogether and stopped telling me I made an excess contribution.

I also tried to manually enter a 2026 1099-R in TurboTax Online exactly as you indicated, but this also did not work at the time. I will try this again using TurboTax Desktop, and see what happens.