Return of Excess for Traditional IRA and Roth IRA

[StrawhatRobin]

In 2025, I made a $4,000 contribution to a Rollover Traditional IRA and a $3,000 contribution to a Roth IRA. After realizing I exceeded the Roth IRA income limit, I requested a 'Return of Excess' for both contributions (totaling $7,000 plus earnings) in February 2026. Because these funds were removed prior to the tax filing deadline, I am reporting the Net Income Attributable (NIA) as taxable income on my 2025 return. I have included this explanation to clarify that while the 1099-R forms will not be issued until 2027, the earnings are being reported and taxed in the 2025 tax year using Distribution Code P and J for the Roth IRA and Distribution Code P and 1 for the Rollover Traditional IRA. Do I need to file form 8606 for the Rollover Traditional IRA? 

[dmertz]

Because the result is treated as no IRA contributions having been made, nothing about this is reportable on Form 8606.

[StrawhatRobin]

Hi @dmertz ,

Thank you for this information. 

[StrawhatRobin]

Hi @dmertz 

​​I contributed a total of $7,000 across my Roth and Rollover Traditional IRAs for the 2025 tax year. In February 2026, I realized my income exceeded the Roth IRA limits.

To fix this, I completed an "excess withdrawal" of contributions and earnings from both accounts this month (Feb 2026). I understand I won't receive the 1099-R forms until January 2027, but I want to report the earnings on my 2025 return now. I am under 59 1/2.

• For the Traditional IRA withdrawal, should I use codes P and 1?
• For the Roth IRA withdrawal, should I use codes J and P?
• How do I manually enter these into TurboTax without the physical 1099-R in hand?

[dmertz]

Correct, except for the traditional IRA you'll need to also mark the IRA/SEP/SIMPLE box.  When TurboTax asks, make sure to indicate that these are 2026 Forms 1099-R.

Each dummy form that you enter will have in box 1 the gross amount distributed and in box 2a the amount of earnings included in the box 1 amount.  For other fields you can just enter information as best you can to satisfy TurboTax's error checking.  Because these forms will have no tax withholding shown, the details of these forms will not be included in your e-filing.  The only effect on your tax return will be to include the taxable amounts on Form 1040 line 4b.

[StrawhatRobin]

@dmertz 

​Thanks for the help! One quick follow-up: Since I am under 59 1/2, will I need to manually apply Exception Code 21 on Form 5329 to avoid the 10% early withdrawal penalty on those earnings? Or does entering the 1099-R with code 'P' automatically handle that in TurboTax?

[dmertz]

I think that 2025 TurboTax automatically treats the taxable amount on a code-JP 2026 Form 1099-R as not subject to penalty, but, if it does treat it as subject to penalty, you can claim this exception.