Excess Roth IRA Contribution
Details – I have a client who contributed to their Roth IRA; however, their income was above the AGI limit. I explained they need to remove the excess contribution before the due date (4/15/25).
My question – Do I need to hold on transmitting the 2024 tax return until the excess is removed or am I allowed to transmit the return as long as they remove the excess along with associated earnings by 4/15/25?
Permalink Submitted by Alan - IRA critic on Tue, 2025-02-11 15:10
Probably best to wait unless the excess is removed, because if there are gains on that contribution which must be distributed with the return of excess, those gains will be taxable in 2024 if the excess contribution was made in 2024. This will avoid having to file a 1040X to add the taxable gains for 2024. The return should also include an explanatory statement indicating the date and amount of the excess contribution and that the excess amount was removed, since the 1099R will not be issued until Jan, 2026.