Need to amend Federal Tax return after over-contributing to Roth that incurred a loss?

[shimmergal909]

Hi - 

Found similar posts but not quite what I am looking for. 

I filed my 2025 Federal/State tax return through Turbotax early February 2026.  Based on my MAGI Turbotax calculated, I was able to contribute 6560 to my 2025 Roth. I contributed this amount AFTER filing as a make-up contribution for 2025. 

A couple of weeks later, I received notification from the IRS that there was a 'math error' and that my taxable income and AGI was higher than what Turbotax calculated. Due to this, I had now over-contributed to my 2025 Roth by about 1,000. I corrected this and removed the excess this week (mid-March 2026).  I incurred a loss of about 15 dollars.  Fidelity (where the Roth is) states they will send a 1099-R form January 2027. 

1. Do I need to amend my 2025 Federal tax return? I assume the answer is 'no' as I incurred a loss and withdrew prior to April 15. There also wasn't anywhere to enter this information on the 1040-x when I reviewed it. 

2. If I do not need to amend my 2025 Federal tax return, am I going to have to designate something somewhere that I withdrew the excess contribution prior to April 15, and that there was a loss in my 2026 Federal tax return? Or will Fidelity's communication with the IRS essentially do this for me? 

Thank you!

[MindyB]

Yes, you should amend your 2025 Federal tax return to document the removal of the excess contribution, even though you incurred a loss and the withdrawal was made before the April 15 deadline. 

You do not need to wait until you receive the 1099-R from Fidelity in 2027, instead, you should enter a substitute 1099-R on your 2025 amendment using the actual amount you received ($985). Because you will have already reported this on your 2025 amendment, you will not need to report anything regarding this withdrawal on your 2026 return. Keep the  1099-R you receive in 2027 for your records.

[shimmergal909]

Thank you for the review

In going into Turbotax to amend, yes I can edit the Roth IRA contribution to the corrected amount, however, the old taxable income/AGI is still written. I do not know how the IRS calcuated my LLC profits as being higher than what they were, so I do not know how do edit that section.  If I amend with the old taxable income/AGI + corrected Roth IRA amount, won't I go through the same process with the IRS again of them having to correct the math error? 

And if yes, wouldn't it be easier to just use the 1099-R when doing 2027 taxes to indicate how I corrected the contribution?

[ThomasM125]

If you amend the return to show that your contribution is what the IRS said was allowed, that should settle that issue. They told you what was allowed based on the return you submitted, so when you submit the same return again, then you should be in compliance with the lower contribution they suggested. Even if they adjust the income down, you should still be OK since you made a smaller contribution.

[shimmergal909]

Not sure if you read the original post -

The IRS said my taxable income/AGI was HIGHER than what was calculated with Turbotax, so it wouldn't be adjusting the income 'down.'

Also the IRS did not tell me what was the allowed Roth IRS contribution amount - they don't overtly tell you this, I had to figure this out myself. 

So going back to original question - If I amend the 2025 return, the only information I can change is my Roth IRA contribution. I do not know how they determined my LLC profits were higher than what they were, and thus that my taxable income was higher. So I cannot edit that. If I resubmit with my old (lower) taxable income/AGI, would that not be an issue? 

[DaveF1006]

Yes, it would be an issue. If you use your original (lower) TurboTax numbers in the "Original Amount" column of the amendment, but the IRS systems have already been updated to a higher amount, the software/IRS will see a discrepancy immediately.

You don't necessarily have to "know" how they got that number to file an amendment for the Roth contribution, but you must use the IRS's figures as your starting point if you aren't contesting them. Here is what I suggest you do.

1. Get your Tax Account Transcript from the IRS website. This will show you exactly what "Adjusted Gross Income" (AGI) the IRS is currently using for you.
2. In your amendment, your "Original" or "Previously Adjusted" column should match the IRS's numbers, not your original TurboTax numbers. 
3. Then, you only change the lines related to the Roth IRA/Excess Contribution removal.

By now, you may be wondering why your income went up. The IRS usually adjusts income higher because of Third-Party Reporting. They likely received a 1099-K , a 1099-NEC, or a 1099-MISC that wasn't included on your original Schedule C.

Tip: Check the "Wage and Income Transcript" on your IRS online account. It lists every document (1099s, etc.) sent to them under your SSN. This will solve the mystery of where that extra income came from.

Summary of your Next Steps:

1.  Don't "Guess": Download your 2025 Account Transcript from IRS.gov to see the AGI they are using.
2. Use the Higher AGI: Use that IRS AGI as the "Starting Point" for your 1040-X.
3. Calculate the Roth Limit: Use that higher AGI to confirm your "allowed" Roth contribution. Since you already removed the excess, the amendment is just the formal "paper trail" to show the IRS you've fixed it.

Explanation: In the "Explanation of Changes" section of the 1040-X, simply write: "Removing excess Roth IRA contribution due to IRS adjustment of AGI, which lowered my allowable contribution limit."

[shimmergal909]

Thank you for the response

1. Yes I did this and am aware of the new AGI

2. Are you saying this as in the TurboTax software should have already amended the AGI based on the IRS numbers? Because it does not. Or are you saying I need to manually adjust this portion myself? Which is the issue - the IRS told me the computation of my net profit or loss was in error, but I don't know specifically where that error lies. I do not see a way to just adjust the AGI only. 

3. I am able to do this part 

Second part - I had to guess in terms of I had to assume my MAGI is the same as my AGI, mainly based on finding an online Roth contribution calculator at Vanguard and inputing my old information to see if it came out to my original calculated Roth contribution (which it did). So I then used the new IRS numbers to calculate the new Roth contribution.

1. Yes I have downloaded all transcripts

2. Not sure what you mean by this. Just using the paper form for example, what portion are you saying this would go into? https://www.irs.gov/pub/irs-pdf/f1040x.pdf

3. Yes I did this.

[DaveF1006]

It sounds like you are stuck in the "gap" between the IRS's automated correction and the manual requirements of an amended return. To clarify the process and help you find that missing "error" in your net profit, here is the breakdown:

1. The AGI and the "Error" in Net Profit (Schedule C)

To answer your second point: No, TurboTax will not automatically update your AGI based on the IRS transcript. TurboTax is a static calculator; it only knows what you type into it.

1. The IRS stated your "computation of net profit or loss was in error." This refers to Schedule C. Since your AGI changed, it means the IRS changed your Taxable Income, likely by adjusting one of these three things:
2. Math Error: You may have simply added or subtracted your expenses incorrectly on Schedule C.
3. Self-Employment Tax: If your Net Profit changed, your Self-Employment tax (and the subsequent 50% deduction of that tax on your 1040) also changed.
4. Transcription Error: You might have carried a number from Schedule C to Schedule 1 incorrectly.
5. How to find it: Compare your original Schedule C, Line 31 (Net Profit) to the IRS transcript line that says "Business Income" or "Statutory Profit/Loss." If those numbers are different, that is your "Error." You must manually go into the "Business Income" section of TurboTax and adjust your income or expenses until the Net Profit matches the IRS’s number. Once that matches, your AGI will automatically fix itself.

2. Where to report the Roth/IRA changes (Form 1040-X)

Regarding your question about where this goes on the paper form (Form 1040-X:(

The AGI Change: This goes in Part I, Line 1.

• Column A: Original AGI you filed.
• Column B: The amount of the increase or decrease.
• Column C: The new AGI (matching the IRS transcript).

The Roth Contribution/Recharacterization: * Roth contributions themselves are not reported on Form 1040-X because they aren't tax-deductible.

However, if you exceeded the income limit and had to move the money to a Traditional IRA (recharacterization) or withdraw it, you must explain this in Part III (Explanation of Changes) on page 2.

You would write: "AGI was adjusted by the IRS from [Old AGI] to [New AGI]. Due to this increase, my MAGI exceeded the threshold for Roth IRA contributions. I have [recharacterized/withdrawn] the excess contribution of $[Amount] plus earnings."

3. MAGI vs. AGI for Roth Purposes

You mentioned you "guessed" that MAGI and AGI were the same. For most people, they are very close, but for a self-employed person, they can differ.

1. MAGI for Roth purposes is your AGI before you take the deduction for the "student loan interest" or "tuition and fees," but after you take the deduction for one-half of your self-employment tax. 
2. If you are using TurboTax, the software will calculate your MAGI for you once you fix the Schedule C error. Look for the "IRA Contribution Merit" or "Roth Contribution" worksheet in your "Forms Mode" to see the exact MAGI number the software is generating.

Summary of your next steps:

1. Fix Schedule C: In TurboTax, edit your business expenses/income until your Net Profit matches the IRS transcript.
2. Verify AGI: Check that your New AGI in TurboTax matches the "Adjusted Gross Income" line on the IRS transcript.
3. Adjust IRA: Go to the "Deductions & Credits" section, select "IRA Contributions," and enter the information about your Roth contribution. The software will tell you if you are over the limit based on the new AGI.
4. Explain in Part III: In the 1040-X "Explanation of Changes" section, clearly state that you are amending to reconcile your records with the IRS CP2000 (or other notice) adjustment and to address the resulting excess Roth contribution.

[dmertz]

The only thing that an amendment would do is provide an explanation of the return of contribution.  It would not change anything on your tax return as already modified by the IRS.  The information that Fidelity provides to the IRS, a 2026 Form 1099-R, is not quite sufficient in that with a loss there is no way to determine from that form exactly how much contribution was returned since it only will report the gross amount distributed to accomplish the return of about $1,000 of contribution.

Your options are to file Form 1040-X to provide this explanation or simply wait and see if the IRS asks for an explanation.  If you choose to file Form 1040-X, it's likely that it would be easiest to simply fill it out by hand.

[shimmergal909]

"You must manually go into the "Business Income" section of TurboTax and adjust your income or expenses until the Net Profit matches the IRS’s number. Once that matches, your AGI will automatically fix itself."

Sorry I am not sure how else to say this - This is the standing issue - I do not know what to adjust within this section to make it match what the IRS states it should be, as everything on my review was inputted correctly. Are you saying I just make up numbers to get it to match what the IRS says??

To be specific with numbers on the transcript it states this:

Business income or loss (Schedule C): 22,423

Business income or loss (Schedule C) per computer: 24,757

Difference: 2,334

Going into what I have listed on Turbotax under this section:

[RobertB4444]

For purposes of this amendment you could absolutely make up numbers to make it match and then file and be done.  But you should be asking whether the service is correct here - they do make mistakes - and why, if your income went up the amount that you could contribute to your retirement plan went down.  

You already have access to the IRS information in your account.  You need to look at your "Wage and Income Transcript".  That has all of the documents that show the income that you received during the year.  Check to make certain that all of those documents match what you have.  Are all of the 1099s issued to you correct?  Did someone issue the same amount twice?  You need to understand why the income on your tax return has been changed.