Reporting income on excess contribution to Roth IRA

CSW
CSW Member Posts: 3 Newcomer
in Income

I have seen similar posts, but that do not answer my question about reporting income on excess contribution using FreeTaxUSA softwared.
---When working on our 2025 return (in February 2026) we realized our 2025 MAGI income exceeded limits for Roth IRA contributions.
---We notified American Funds and they returned the Excess Contribution and related earnings. They told us how much was income vs distribution for 2025.
---The distribution occurred in 2026 so American funds will not general a 1099-R until next year.
--- I understand reporting in 2025 will mean I do not need to pay 6% penalty fee. IRS simply says I need to report the income, but I'm don't understand how to do this in thesoftware.

—Online advice says to create a dummy 1099-R with distribution in 1a , income in 2a, with and code PJ.

Will this prompt FreeTaxUSA to correctly calcuate the taxes we need to pay and not apply any fee? If so, what year do I put on the 1099R? (2026?) To be clear, I am asking how to make the software do right calculations, I am not trying to make it seem like I actually got a 1099-R.

Comments

  • GeorgeM
    GeorgeM FreeTaxUSA Agent Posts: 98 image
    Hello CSW:

    Yes, you can report the excess contribution to your Roth IRA and the earnings by creating a “dummy” 1099-R. However, if you elect to report the excess contribution and earnings on your 2025 tax return (rather than waiting until next year when you receive your 1099-R), use code 8 in Box 7, rather than P and J (the Code J relates to an early distribution from a Roth IRA, with no known exception, and in most cases under age 59 1/2).

    Code 8 in Box 7 denotes that the excess contributions plus earnings are taxable in 2025, which is the tax year during which your excess contribution plus earnings took place. Code P in Box 7 denotes that your excess contribution plus earnings are taxable in the prior year—tax year 2024—which is not the case with your situation.
  • CSW
    CSW Member Posts: 3 Newcomer

    Hi, I am having a new issue. When I create a "dummy" in Tax Free USA website and submit the taxes I get the error message below about Payer Identification Number. This is the TIN on other documents we've received from American Funds - we doublechecked with our financial consultant there and he confirmed this is the TIN for American funds. Is there a way to get past this? The TIN I am using is 95-6817943

    1099-R Payer Identification Number
    The IRS is rejecting the return because the Taxpayer Identification Number (TIN) on a 1099-R doesn't match their records.

  • CSW
    CSW Member Posts: 3 Newcomer

    Never mind! We found a typo! Taxes have been accepted. Really appreciate the previous help, and it worked.

  • GOSHRX
    GOSHRX Member Posts: 1 Newcomer

    Helpful thread. I have the same situation, but with Vanguard. I've pulled out the excess 2025 Roth contribution plus gain using Vanguard's online portal for doing just that, and received the funds a few days ago (March, 2026). I'll be creating a "dummy" 1099-R filled out as described, code 8. Hope I can remember what I did a year from now when the actual 1099-R shows up! Thank you!

  • kiarab
    kiarab FreeTaxUSA Agent Posts: 285 image
    Hello again,

    I'm glad you were able to find the error with the TIN and submit your return. Hope to see you again next year :)

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