Question

Excess IRA Roth contribution - withdrew excess but now Turbo Tax and forms are saying I still have excess

Forum|Forum|1 year ago
April 16, 2025
1 reply
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Hello,

We are married filing jointly and each of us contributed to a Roth IRA for Tax Year 2024 in excess. We are permitted to contribute to a Roth, but are limited to below the maximum based on our income. We have requested extensions for Tax Year 2024, and so are doing a timely withdrawal to avoid the penalties. We understand any growth on the contributions are subject to income tax for 2024.

We initiated returns of excess contributions (plus the earnings from the contributions). When we input those values into Turbo tax now, it says we still have excess contributions. I imagine if we go to withdraw this new excess from our IRAs, then we will have growth on top of that, which will in turn add to our taxable income.

What is the solution for this?

D

DanaB27

Yes, if your are in the phaseout range the earnings on the returned excess contribution can create a new excess contribution. In this situation it might be best to withdraw a little extra when you request the return of excess contribution plus earnings.

Please see What if I made an excess Roth IRA contribution for other options.

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T

Taxdog_2025Author

Thanks for the reply. If I go the route of withdrawing more excess, how do I determine how much extra to withdraw to try to avoid this circular outcome? The money will have earnings on both my and my spouse's excess contributions, so just trying to understand how this does not continue to increase our taxable income and result in further excess contributions.

Also, if I choose to go the route of recharacterizing this last portion that is showing as excess to a traditional IRA, what do I need to reflect on the 2024 Tax Return, and do I need to do anything for 2025?

Thanks for the help.