Excess Roth IRA Contributions 2024
I overcontributed to my Roth IRA for 2024 and will be requesting return of excess contributions before the tax deadline this April 2025. I understand I will be avoiding the 6% tax penalty and 10% early withdrawal penalty due to this on time corrective action. I also understand I have to report and pay taxes not on the contribution amount but any gained income/interest from it. I am waiting to hear back from my IRA custodian about receiving a 1099-R.
- Are the taxable earnings taxed the year the original contribution was made (2024) or the year the excess contributed and taxable earnings were received (2025)? If the answer is 2024 and if I won’t receive a 1099-R until 2026, do I just have to file my 2024 taxes now and addend them when I receive my 1099-R?
- Also per IRS (see below) looks like they would accept this information in Lines 4a/4b and an explanation. In FreeTaxUSA - how are we able to fill in lines 4a/4b and attach an explanation statement to e-file?
- Do I have to fill out forms 5329 or 8606? I assume not based on what I gathered
In this article, the IRS states "If, in 2024, you made traditional IRA contributions or Roth IRA contributions for 2024 and you had those contributions returned to you with any related earnings (or minus any loss) by the due date (including extensions) of your 2024 tax return, the returned contributions are treated as if they were never contributed. Don’t report the contribution or distribution on Form 8606 or take a deduction for the contribution. However, you must include the amount of the distribution of the returned contributions you made in 2024 and any related earnings on your 2024 Form 1040, 1040-SR, or 1040-NR, line 4a. Also include the related earnings on your 2024 Form 1040, 1040-SR, or 1040-NR, line 4b. Attach a statement explaining the distribution”
Answers
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I'll answer each of your questions below.
1) The earnings are likely taxable on your 2024 return. However, whether you report the income on your 2025 return next year or amend prior year returns will depend on the code contained in Box 7 of the 1099-R. (A code including the number 8 will indicate that your 1099-R should be reported for the year in which the form was issued. A code of P indicates the 1099-R income is taxable in the year that the contribution was originally made.) However, you won't know what code will be indicated until your 1099-R is issued next year.
2) This information is reported on Lines 4a and 4b of your Form 1040. If an explanation is required, the software will generate the explanation for you based on the information entered. An additional explanation or statement does not need to be attached to your return beyond what the software generates.
3) The software will generate and fill out Form 5329 and/or Form 8606 if required. If you have questions about the specifics of either form generating for your return, please reach out to Support from within your account. They will be able to view the information specifically for your situation.
