Roth Corrective distribution – amend return to extend deadline?
I have a situation where $6k was contributed to a Roth IRA in 2024, and it was classified as a contribution for 2024. Then in 2025 an additional $6k was contributed to another Roth IRA account and it was also classified as a contribution for 2024. The person is over 50, and they meet the earning requirements, so they are eligible for the maximum of $8k in Roth contributions. The tax return for 2024 was filed timely (before Apr 15). The issue was discovered in May when the 5498 forms were received from the two custodians. We have contacted the custodian of the Roth account that received the contribution in 2025. We have requested the corrective distribution for the $4000 excess contribution. They are returning $4013 (the excess, plus earnings). My understanding is the $13 earnings will be taxable income in 2025, since the excess contribution occurred in 2025 (even though it was classified as a contribution for 2024). Is this correct? And, most importantly, since the tax return for 2024 had already been filed timely, do we need to amend the return for 2024 to properly extend the deadline for correction to Oct 15, 2025 to make this corrective distribution that is occurring in late May valid? If we do have to file an amended return, it appears the only reason we are amending it, is to attach a note regarding the mistake and the correction, as there is no tax consequence (as long as the corrective distribution is considered completed on time). Thanks for your help!
Permalink Submitted by Alan - IRA critic on Tue, 2025-05-27 10:25
You are correct that returned earnings on an excess contribution removal are taxable in the year in which the contribution was made, so the $13 will be taxable on the 2025 1040. This should be confirmed by the 1099R coding for the returned contribution, which will be issued in Jan, 2026.
A taxpayer who either files their 2024 return by 4/15 OR files a timely extension by that date will have until the extended due date (10/15/2025) to have the excess returned, therefore this taxpayer is automatically allowed the extended time to have the 2024 contribution returned.
An amended 2024 return should be filed and in the “explanation of changes” box a statement should be made “Filed pursuant to Sec 301.9100-2”. Then an explanation that 4000 of excess contributions for 2024 that was made in 2025 was removed on “05/date/2025”. This explanation allows the IRS to know that the excess showing on the 2024 5498 forms was removed. Otherwise they would not know until Jan, 2026 and could bill the excise tax, although they typically do not react that quickly.
That said, because the IRS rarely does react quickly to excess contributions, plenty of taxpayers in this situation would not bother to file the amended return, expecting the 1099R issued next January to be sufficient for the IRS to know that the excess was removed on time. In the meantime, if contacted by the IRS they could present documentation to show that the excess was removed prior to 10/15/2025 deadline and the IRS already knows they filed by 4/15.
So there is a choice between the technically correct method (1040X) and the lazier method.