Contributed by: Henry, FreeTaxUSA Agent, Tax Pro
If you withdrew an excess Roth IRA contribution and its earnings after the tax year ended but before your tax filing deadline (including extensions), the earnings need to be reported as income on the tax return for the year the contribution applies to—even though the excess contribution itself isn’t taxable.
For example, you made a 2026 Roth IRA contribution but discovered in early 2027 that it exceeded your limit, and you withdrew the excess plus earnings before April 15, 2027. This needs to be reported on your 2026 tax return.
Because the official Form 1099-R usually won’t arrive until January of the year after you made the withdrawal, you may need to decide whether to wait and amend your return later or enter a placeholder Form 1099-R now using information from your account administrator.
Entering a placeholder Form 1099-R can be helpful if the excess contribution generated significant earnings, and you’d rather account for that income now instead of being caught off guard by a tax bill or penalty later.
Before entering the placeholder form, confirm with your account administrator that you’ll receive a Form 1099-R with Code P next year, and ask for the payer’s ID number, address, gross distribution amount, and taxable amount. If you’re under age 59 ½, ask whether Code J will also apply.
Excess contribution example
Brent made a Roth IRA contribution for 2026 but later found out it was an excess contribution. In February 2027, Brent withdraws the excess contribution plus $1,400 of earnings. Brent’s account administrator confirms that the official Form 1099-R won’t arrive until January 2028 and will show Code P.
To report the $1,400 of earnings on the 2026 tax return now, Brent enters a placeholder Form 1099-R using the payer information and amounts provided by the administrator. His 2026 Form 1040 looks like this:
💡 Note: Withdrawing the excess contribution properly and on time helps Brent avoid the 6% excise tax. It also means the excess contribution and its earnings are exempt from the additional 10% tax on early distributions.
Entering a placeholder Form 1099-R in FreeTaxUSA
Once you’ve gathered the payer and distribution details from your account administrator, you can enter the placeholder Form 1099-R by following these steps:
- Follow the menu path: Income > Common Income > Retirement Income (1099-R).
- Select Add a 1099-R and continue.
- Choose Form 1099-R, 401(k)/pensions/IRA distribution and continue.
- Choose Enter it manually and continue.
- Enter the payer’s information.
- Enter the payment information.
- For Box 1, enter the gross distribution amount from your account administrator – this is the excess contribution plus any earnings it generated.
- For Box 2a, enter the taxable amount from your account administrator – this is the earnings attributable to the excess contribution.
- For Box 7, enter Code 8 to let the software know the earnings are taxable in the current year. If you’re under 59 ½ and confirmed with your administrator that Code J applies, include it as well.
- Continue until you return to the Your Retirement Income screen.
What to do when the official Form 1099-R arrives next year
When you receive the official Form 1099-R, compare it with the Form 1099-R information you entered on your tax return.
The only expected difference is the distribution code in Box 7: the official form should show Code P (and Code J, if applicable) because it was issued for the year after the contribution year, while you entered Code 8 on the placeholder form to report the income in the contribution year.
If all other information matches, don’t enter the official form again—simply keep it with your tax records. If any other information differs, such as the gross distribution or taxable amount, you’ll need to file an amended tax return to correct your Form 1099-R entries.