Thanks for pointing that out! So since I caught it in February 2025 and requested removal right away, does that mean I'm still within the window to avoid the 6% penalty for 2023 contributions? Does the "plus extensions" part mean I actually have until October 2024?

Unfortunately, you're outside the window to avoid the penalty completely. For 2023 contributions, you needed to remove any excess by the tax filing deadline plus extensions - so by October 15, 2024. Since you removed it in February 2025, you'll likely owe the 6% excise tax for 2023. When you amend your 2023 return, you'll need to include Form 5329 to calculate this penalty on the excess amount. The good news is you won't owe this penalty for 2024 since you removed it early in 2025. The earnings portion ($350) will be reported on your 2024 tax return when you receive the 1099-R from Fidelity, and those earnings will be subject to income tax plus a 10% early distribution penalty if you're under 59½.

Yes, sorry for the typo! I meant Form 5329. The tax software prompted me to complete this when I started looking into amending my return. Thanks for catching that!

I tried looking on my insurance portal but I only see current coverage info, not last year's form. Is there usually a specific section for tax forms? My insurance is through BlueCross if that matters.

Most insurance portals have a section specifically for tax forms or documents, especially during tax season. For BlueCross, look for a section called "Tax Information" or "Tax Forms" in your online account. Sometimes it's under "Documents" or "Forms & Documents." If you don't see it, try searching specifically for "1095" in the search bar if your portal has one. If you still can't find it, call BlueCross directly and ask them how to access your 1095-B online. They might need to enable access or they can often email you a copy immediately rather than waiting for mail. This is usually much faster than waiting for a replacement to arrive by mail.

Good point! I had marketplace coverage (ACA plan) and they send a different form - the 1095-A. Those ARE required for filing if you got any premium tax credits. Don't confuse the different 1095 forms. The A version is necessary, but B and C versions aren't required for filing.

You know what, this might actually make sense! She did travel to three different trade shows for them and they reimbursed her separately from her regular paycheck. I didn't even think about that. She also bought some computer equipment they reimbursed her for when she started working remotely. But shouldn't reimbursed business expenses NOT be reported on a 1099-MISC at all? Now I'm even more confused.

You're absolutely right - properly documented business expense reimbursements should NOT be reported on a 1099-MISC or considered taxable income. If the employer reimbursed legitimate business expenses under an accountable plan (basically meaning your wife provided receipts and documentation), then this 1099-MISC is likely incorrect. This actually makes it more likely there's an error in their accounting system. Sometimes companies, especially smaller ones with less sophisticated payroll systems, accidentally code expense reimbursements as "other income" which triggers an automatic 1099-MISC. You definitely need to contact them to get this corrected.

This happened to me! Turned out I was getting paid by two technically different legal entities under the same corporate umbrella. Super confusing but actually legitimate in my case.

I just double-checked and yes, the EIN is exactly the same on both forms. And no, she didn't do any work outside her regular job duties. It was a standard 9-5 marketing position. I'm going to call her old boss tomorrow morning. After reading everyone's comments, I'm pretty sure this is either a mistake or related to those expense reimbursements. Will update when I find out!

Thanks for the heads up! Do you know if there's a specific deadline for this? Is it the tax filing deadline (April 15, 2026) or do I need to do this before the end of 2025?

You have until the tax filing deadline for the year of the contribution, including extensions. So for contributions made in 2025, you have until April 15, 2026 (or October 15, 2026 if you file an extension) to withdraw excess contributions without penalties. However, I'd recommend handling it sooner rather than later just to have it resolved. And yes, any earnings specifically tied to those excess contributions also need to come out, and those earnings would be taxable income in the year you withdraw them.

Unfortunately, once you contribute to someone else's Roth IRA, that money legally belongs to them. It's now part of their retirement assets. The best approach is to address this in your divorce settlement negotiations - you could potentially ask for other assets of equivalent value in the division of property. Your situation is exactly why my attorney advised me to pause all contributions to my spouse's accounts as soon as divorce was on the horizon. Some states might view this differently depending on community property laws, but generally speaking, that money is considered gifted to them.

Thanks for the insight. That's what I was afraid of. I'll definitely bring this up with my divorce attorney to see if we can factor it into the overall settlement. Lesson learned for sure.

But wouldn't the 401k plan administrator be responsible for coding this properly? If they put code E instead of something else, couldn't that be the actual problem rather than the IRS misinterpreting it?

You're absolutely right that the plan administrator has primary responsibility for coding 1099-R forms correctly. Sometimes administrators do use incorrect codes, and that could be part of the problem here. Code E isn't necessarily wrong, but there's some ambiguity in how it's applied. Ideally, the administrator should have used a distribution code that more clearly indicates a return of after-tax contributions. It might be worth contacting your plan administrator to verify they used the correct code for your specific situation. They can issue a corrected 1099-R if needed, which would save you the hassle of explaining things to the IRS.

I used H&R Block software for a similar situation and had to manually override it. There should be an option to specify that the distribution isn't taxable despite what the 1099-R coding suggests. You might need to include an explanation or use the tax software's "notes" feature to document why you're treating it differently than the standard interpretation of the form.