Contributed by: Henry, FreeTaxUSA Agent, Tax Pro
An excess Roth IRA contribution often isn’t discovered until you prepare your tax return the following year. When that happens, you generally have until the due date of the return, including extensions, to withdraw the excess and avoid the penalty.
Although you might not withdraw the funds until the following year, you generally must still report the withdrawal on the tax return for the year the contribution applies to. However, you likely won’t receive Form 1099-R in time to include it on that return. If that happens, you may need to file your original return without reporting the distribution. Then, once you receive Form 1099-R the following year, file an amended return to report the distribution.
Excess contribution example
In May 2025, James makes a Roth IRA contribution for 2025. He doesn’t realize he made an excess contribution until February 2026, while preparing his 2025 tax return. He immediately contacts his account administrator and requests a return of the excess contribution along with the related earnings.
Because the withdrawal occurs in 2026, it will be reported on a 2026 Form 1099-R, which James won’t receive until early 2027. Box 7 will show codes P and J. Code P indicates a return of excess contributions plus any taxable earnings reportable in the prior year — 2025. Code J indicates an early distribution from a Roth IRA.
- If Box 4 is blank or shows $0, James generally doesn’t need to report the 2026 Form 1099-R on his 2026 tax return. If he does choose to enter the form, it won’t cause a problem. FreeTaxUSA will use the codes in Box 7 and the year shown on the form to exclude the distribution from his 2026 Form 1040, and he’ll see an alert directing him to report the distribution on his 2025 tax return.
- If Box 4 shows federal income tax withholding, James should enter the 2026 Form 1099-R on his 2026 tax return so he receives credit for that withholding. The withholding is treated as paid in 2026 and should be reported on his 2026 tax return.
- Either way, James will need to amend his 2025 tax return to include the 2026 Form 1099-R information. The gross distribution belongs on Form 1040, Line 4a, and the taxable earnings belong on Line 4b. If federal income tax was withheld and reported in Box 4, James should exclude that amount when entering the Form 1099-R on his 2025 tax return because that withholding was paid in 2026 and reported on his 2026 tax return.
- Although Code J identifies the distribution as an early Roth IRA distribution, this corrective distribution isn’t subject to the 10% additional tax on early distributions. FreeTaxUSA will apply this exception automatically.
What if the excess contribution generated significant earnings, and reporting those earnings when you amend your return could increase your tax liability? Read more in this Community article about how to enter a placeholder Form 1099-R.
How to report an excess Roth IRA contribution and withdrawal in FreeTaxUSA
STEP 1: Report your Roth IRA contributions
You’ll report the Roth IRA contributions by following menu path: Deductions/Credits > Common Deductions/Credits > IRA Contributions.
Enter the total Roth IRA contributions made for the current tax year:
Based on the income and filing status information you’ve already entered, the software will calculate whether you have excess Roth IRA contributions. If you’ve withdrawn the excess — or plan to withdraw it by the tax filing deadline (including extensions) — answer Yes when asked if you withdrew any Roth IRA contributions. Then enter the amount of the excess contribution withdrawn. These entries let the software know the 6% excise tax doesn’t apply to the amount withdrawn.
Remember to contact your brokerage or plan administrator to actually make the withdrawal.
💡 Note: Don’t include any earnings withdrawn, and don’t exclude any losses, when reporting the withdrawn contribution amount. For example, if you contributed $7,000 and lost $100 on the investment, you’d only have $6,900 left to withdraw – but you’d still enter $7,000 as the withdrawn contribution amount, not $6,900.
STEP 2: Report your Roth IRA distributions
If you haven’t received Form 1099-R, you generally won’t complete this step just yet. File your original return without the 1099-R information for now. Then, once you receive Form 1099-R the following year, come back and amend this year’s tax return to add that information.
After starting the amendment, you can enter Form 1099-R by following menu path: Income > Common Income > Retirement Income (1099-R).
Conclusion
You can correct an excess Roth IRA contribution without owing the 6% excise tax if you withdraw the excess by the applicable deadline. Just remember that any related earnings still need to be reported in the correct tax year.
Keep copies of your withdrawal request, the account administrator’s confirmation of the transaction, and any Form 1099-R you receive. These records can help support the tax year in which you reported the distribution and the amount of earnings you included on your return.