How to report 2025 Return of Excess Roth earnings without a 1099-R (and Form 5329)

CYoc7
CYoc7 Member Posts: 1 Newcomer
in Filing my taxes

Fidelity has already processed a "Return of Excess" in February 2026, returning my amount plus $115.85 in earnings.

Since the correction happened in 2026, I won't get a 1099-R until next year. I know I need to report the $115.85 on my 2025 return and pay the 10% penalty.

I have two issues in the software:

  1. I previously answered "Yes" to having a 2024 excess contribution, which incorrectly filled out Form 5329 Part IV (showing a 6% excise tax). How do I clear this out correctly?
  2. What is the best way to trigger the 10% penalty (Part I) on the $115.85 earnings without the 1099-R form in hand? Should I enter a "substitute" 1099-R with Code 8, or is there a manual penalty screen I'm missing?

Best Answer

  • Henry
    Henry FreeTaxUSA Agent Posts: 140 image
    Answer ✓
    Hi CYoc7, to get back to the question about excess IRA contributions in 2024, select Deductions/Credits > Common Deductions/Credits > IRA Contributions. Then review your answer to the second question on that screen.

    According to the instructions for Form 5329, you can withdraw some or all of your excess contributions for 2025 and they will be treated as not having been contributed if:
    -you make the withdrawal by the due date, including extensions, of your 2024 tax return
    AND
    -you withdraw any earnings on the withdrawn contributions and include the earnings in gross income.
    (see the instructions for Line 15 on pg 7, https://www.irs.gov/pub/irs-pdf/i5329.pdf)

    It sounds like this is what you've done, so you're on the right track. The Form 5329 instructions further state that the return of excess contributions that follows the guidelines above is not subject to the early withdrawal penalty.

    To report the excess contribution on your 2025 tax return, you should select Deductions/Credits > Common Deductions/Credits > IRA Contributions and enter your total 2025 Roth IRA contributions. Then click on Save and Continue at the bottom of the screen. The software will automatically calculate any excess contribution amount based on the information you have provided on your tax return regarding your income and filing status.

    Since you withdrew the excess amount, you can indicate that in the software when you're asked about 2025 contributions withdrawn from a Roth IRA.

    When you withdraw the contributions by the due date, the IRS says that it needs to be reported on your 2025 Form 1040 with the related earnings on line 4b. This withdrawal should be reported to you on a Form 1099-R, but--as you mentioned--you won't receive the 1099-R until next year if the excess contribution and earnings were withdrawn in 2026. So even though it needs to be reported on your 2025 tax return, you won't be able to do that until you receive the 1099-R from your plan administrator. We recommend that you wait to receive the 1099-R.

    For now, you will just need to file your tax return. Then when you receive the 1099-R next year, you can come back and amend your 2025 return to include the 1099-R information.

Answers

  • MSM
    MSM Member Posts: 2 Newcomer

    Hello, in a similar boat regarding excess withdrawal of contributions. Can I manually fill in and complete a 1099-R for 2025 even if my Broker has not issued it to me? I know my earnings for 2025 from excess contributions. I would put my total distribution (contributions plus earnings in box 1) and earnings in box 2a. Then use code PJ in box 7 which triggers the 10% penalty.

    Or is it better to wait for next year's tax filing deadline and file an amended return?

  • MatthewD
    MatthewD FreeTaxUSA Admin, FreeTaxUSA Agent Posts: 963 image
    Hello MSM,

    Filling out your own 1099-R without a form 1099-R is an option, but we don't actually provide instructions for that. If you find a way, you can do that. We recommend waiting until next year and amending your 2025 return when you have the correct 1099-R form in hand.

Categories