Removing excess Roth

[Spencerpj12]

I need to contact Vanguard to remove excess Roth contribution made last year.  I understand they will remove the excess plus gains, and I will pay taxes on the gains.  I think they give me a form 1099-R? Question: how will I report this when using TurboTax? If I still say I added the $ to my Roth, it will automatically impose the 6% penalty, or am I missing something or a process? 

[AnnetteB6]

You should report the 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.  

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 ...
 

[Spencerpj12]

Do you have any idea how the process will work with Vanguard? Will they amend my 1099 of other accounts to add the income from the gains from the overage? , or just send another one. Any chance this happens quickly if I get on it Monday, very stressed, thx? 

[DanaB27 · Accepted solution]

You will request the withdrawal of excess contributions plus earnings with Vanguard, usually they have a form for this. The earnings will be taxable in the year you made the contribution.

If you made an excess contribution in 2024 and withdrew the 2024 excess Roth IRA contribution plus earnings in 2025 before the due date, then you will get a 2025 Form 1099-R in 2026 with codes P and J. This 1099-R will have to be included on your 2024 tax return and you have two options:  

• You can wait until you receive the 2025 Form 1099-R in 2026 and amend your 2024 return or
• You can report it now in your 2024 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 2025 Form 1099-R into the 2025 tax return since the withholdings are reported in the year that the tax was withheld. The 2025 code P will not do anything to your income to the 2025 tax return income but the withholdings will be applied to 2025.

To create a Form 1099-R in your 2024 return please follow the steps below:

1. Login to your TurboTax Account 
2. Click on the "Search" on the top right and type “1099-R” 
3. Click on “Jump to 1099-R”
4. Answer "Yes" to "Did you get a 1099-R in 2024?"
5. Select "I'll type it in myself"
6. Box 1 enter total distribution (contribution plus earning)
7. Box 2a enter the earnings
8. Box 7 enter J and P
9. Click "Continue"
10. On "Is the IRA/SEP/SIMPLE box on this 1099-R checked?" screen answer "No, the box is blank"?
11. On the "Which year on Form 1099-R" screen say that this is a 2025 Form 1099-R.
12. Click "Continue" after all 1099-R are entered and answer all the questions.
13. 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.