Roth IRA – Return of Excess
Good morning,
My client made a contribution of $8k to her Roth in August 2024. She discovered when having her taxes done that, she had too much income so I need to remove the contribution plus earnings, however the earnings are negative as of today which would make her gross amount $7,516. My question is do I return the $7,516 or do I return the $8k contribution and why? Thank you
Permalink Submitted by Alan - IRA critic on Tue, 2025-04-08 12:47
The Roth custodian should be asked to return the 2024 excess contribution of 8000. They will automatically calculate the gain or loss and return the net. One consolation of the loss is that there will be no taxable gains distributed that would have been taxable in 2024. Had there been a gain and the 2024 return has been filed, that would require an amended return.
While less than 8000 is actually returned due to the loss, client is treated as having removed the entire excess contribution.
The deadline for the return of excess is 4/15 unless the return OR an extension is filed by 4/15. Otherwise, the deadline is 10/15.