How to Report Contribution Earnings from a Prior-Year Excess Roth IRA Removal (2024)
Hello,
I need help ensuring I am correctly reporting a transaction for my 2024 tax return.
The Situation:
- In 2024, I contributed
$6,999.96to a Roth IRA but had no earned income for the year. - In September 2025, before my tax filing extension deadline (Oct 15), I had my broker (Schwab) process a "return of excess contribution."
- The total gross distribution removed from my Roth IRA was
$10,195.30. - This means the taxable earnings are
$3,195.34($10,195.30-$6,999.96). - I understand these earnings are taxable on my 2024 return, but I will not receive a Form 1099-R for the 2024 tax year. I believe I will receive 1099-R in early 2026 for 2025 tax year.
The Question:
Based on research, it seems the best way to handle this in FreeTaxUSA is to manually create a 2024 Form 1099-R entry.
Can you please confirm if the following entries are correct to ensure the income and the correction of the excess contribution (Form 5329) are handled properly? I'm in Ohio (School District Number: 3204).
- What type of 1099-R?
Form 1099-R, 401(k)/pensions/IRA distribution - Payer's Name:
Charles Schwab & Co., Inc. - Payer's ID Number:
94-1737782 - Box 1 (Gross distribution):
$10,195.30 - Box 2a (Taxable amount):
$3,195.34 - Box 4 (Federal Income Tax Withheld):
$0(I chose to withhold $0) - Box 7 (Distribution code(s)):
8andJ - Box 14 (State Tax Withheld):
$0 - Box 15 (State):
OH - Box 16 (State Distribution):
$10,195.30
Should all other boxes be left blank?
The whole form is shown below:
Thank you for your help!
Answers
-
Hi Fastesthorse,
Instead of entering a "fake" 1099-R, I recommend that you enter the Roth Contribution on the IRA Contribution page and follow the instructions. The software will calculate the excess and alert you and ask you if you withdrew it.
Then in 2026, when you (and the IRS) get the 1099-R, you may come back and amend your 2024 return to report the 1099-R with the earnings.
I also recommend you contact FreeTaxUSA support so a support agent can review your account, since we do not have access to it through the Community Forum.0 -
Hi MatthewD,
Thank you so much for the response.
It indeed asked me if I withdrew it, and I answered Yes but it didn't say anything else at that point. Does that step update something in 1040 or is that just for FT USA record?
And I thought just filling it now was easier/straightforward than having to amend it in 2026 as I'd have to amend federal/state/local taxes which sounds like a hassle later.
So far I have filled the "fake" 1099-R like so:
But if the better way is to answer "I withdrew it" in FTUSA and submitting the taxes now, and amending it in 2026, I can do that as well.
0 -
Hi Fastesthorse,
Yes, that step does update your 1040. Primarily it eliminates the penalty that will be assessed on Form 5329 by overcontributing to an IRA.
If you find that entering a "fake" 1099-R suites your situation and you are satisfied with the result, by all means proceed forward. That can eliminate the need to file an amendment later.0 -
Update:
I went with TurboTax as it has a step by step guide on how to handle this exact scenario:
I just did that and got done with my 2024 taxes.
FTUSA needs step-by-step guides like that. Also FTUSA didn't allow me to enter 2 letter code in the Box 7 of 1099-R form which is required in this case (P J).
Please create guides like that for FTUSA as well, so FTUSA users can take care of scenarios like this with confidence. Thank you!
0 -
Hi Fastesthorse,
Thank you for the suggestion about using a step-by-step guide. It is something we may consider, since there may be a need, however, we generally suggest that you have forms before making entries on your tax return, so it is accurate. That way you can avoid errors and filing amendments in the future.
Keep in mind the step-by-step you shared was part of their community forum, not an official step-by-step from TT.0
