Excess contribution to Roth IRA - what steps for TurboTax correction and future filing?

So here's my situation: - Filed my taxes two days ago using TurboTax. Both federal and state returns have been accepted already. - During the filing process, TurboTax flagged that my husband and I exceeded the Roth IRA contribution limit since our MAGI was about $2.5k over the threshold. - Immediately transferred the excess contributions ($6.2k each) back to our checking accounts that same day. - I indicated in TurboTax that we had withdrawn the excess amounts and only kept the eligible contribution portion. But today I called Fidelity and the customer service rep told me: - I apparently took the wrong steps and shouldn't have withdrawn directly to our checking account - The early withdrawal might trigger penalties - IRS will see that earnings stayed in the Roth IRA account - I should consult with a tax professional ASAP Will I receive forms to amend my return even though I've already filed? I'm honestly not sure what my next steps should be. Any thoughts on how to fix this mess? Really stressed about potential penalties.

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20 comments

Ethan Wilson

•8M

What happened here is a pretty common issue with Roth IRA contribution limits. When you exceed the contribution limit, you need to request what's called an "excess contribution removal" rather than just withdrawing the money. For the excess contribution removal, your brokerage would calculate any earnings attributable to those excess contributions, and both the contribution and related earnings would be withdrawn. The earnings would be taxable for the year the correction is made, and potentially subject to the 10% early withdrawal penalty if you're under 59½. Since you've already filed, you'll need to contact Fidelity again and specifically request an excess contribution correction. They should be able to help recharacterize what you did as a proper correction. They'll issue you a Form 1099-R for the distribution in January 2026 (for 2025 tax year), showing the earnings portion that's taxable. You might need to file an amended return (Form 1040-X) once you get the corrected documentation from Fidelity to properly report this transaction. The good news is you recognized this issue quickly, which helps minimize any earnings on the excess contribution.

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Ethan Wilson

•8M

If you're in a similar situation but haven't filed yet, I would recommend making the excess contribution removal before filing. Contact your brokerage and specifically request an "excess contribution removal" or "return of excess contribution." This way, they'll properly calculate the earnings attributable to the excess and provide the correct documentation. You'll have cleaner tax reporting this way. The 6% excess contribution penalty does indeed apply for each year the excess remains in your account. It's calculated on your Form 5329 and gets added to your tax bill. This is why it's important to correct excess contributions as soon as you discover them - the penalty continues to apply until the excess is removed or absorbed by an unused contribution limit in a future year.

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Yuki Tanaka

•8M

I had a similar issue last year with excess Roth IRA contributions and found that taxr.ai really helped me sort it out. I was completely confused about how to handle the excess contribution removal and what forms I needed to file. I uploaded my tax documents to https://taxr.ai and they analyzed everything, showed me exactly what forms I needed to file, and explained the proper way to report the excess contribution removal. Saved me from making costly mistakes with the IRS. They even showed me how to properly document everything so I had proof of taking corrective action if the IRS ever questioned it.

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Yuki Tanaka

•8M

Yes, it specifically helped with calculating the earnings portion of the excess contribution. They explained that the earnings are considered taxable income for the year you take the distribution and may also be subject to the 10% early withdrawal penalty if you're under 59½. In my case, I hadn't filed yet, so I was able to correctly report everything on my original return instead of having to amend. The service is actually quite different from calling a tax professional because it's available 24/7 and much more affordable. As for security, they use bank-level encryption for all uploaded documents and don't store your information longer than needed. You can actually delete your data after your analysis is complete. I was initially concerned about this too, but their privacy policy was really clear and reassuring.

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Andre Laurent

•8M

Just wanted to follow up on my skepticism about taxr.ai - I actually ended up trying it and was really impressed! Had a similar excess contribution issue with my SEP IRA and I couldn't get a straight answer from my broker or tax preparer. Uploaded my forms to taxr.ai and they immediately flagged the excess contribution, showed me the exact section of tax code that applied to my situation, and gave me step-by-step instructions to fix it. The analysis broke down the earnings calculation and exactly how to report it on my tax forms. Definitely saved me from a headache with the IRS and potential penalties!

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Emily Jackson

•8M

If you're really stuck trying to get clear answers from Fidelity about this, I'd recommend using Claimyr to get through to an actual IRS agent. I spent weeks trying to figure out a similar Roth IRA issue last year and kept getting different answers from my brokerage. Finally used https://claimyr.com to connect with the IRS (there's a demo at https://youtu.be/_kiP6q8DX5c showing how it works). They got me through to an agent in about 15 minutes when I had been trying for days. The IRS agent walked me through exactly what forms I needed and the correct procedure for fixing excess contributions after filing. Totally worth it for the peace of mind knowing I was handling it correctly.

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Emily Jackson

•8M

They basically have a system that waits on hold for you with the IRS. When they reach an agent, you get a call connecting you directly to that agent. So you don't waste hours listening to hold music. They navigate the IRS phone tree and wait through the long hold times, then call you when they've got an actual human on the line. I was skeptical too before trying it. I understand the doubt - it sounds too good to be true when you've experienced how impossible it is to reach the IRS. But it's legitimate. They don't claim to "skip the line" - they just have the technology to wait in it for you and then connect you once they reach an agent. The YouTube video I linked shows exactly how it works. For me, it was the difference between getting no answers and finally sorting out my tax situation correctly.

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Liam Mendez

•8M

Just wanted to follow up about my skepticism regarding Claimyr. I actually tried it after continuing to fail getting through to the IRS myself about an excess Roth contribution issue. It worked exactly as advertised - I got a call back in about 20 minutes connecting me directly to an IRS representative. The agent confirmed I needed to get a corrected 1099-R from my brokerage showing the return of excess contribution, and then file Form 5329 with a statement explaining the situation. This was completely different advice than what my brokerage had told me! Seriously saved me from major headaches and potential penalties. Sometimes admitting you're wrong feels pretty good.

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Sophia Nguyen

•8M

I work at a brokerage firm (not Fidelity) and see this issue all the time. A quick clarification that might help others: there's a difference between a regular withdrawal and a "return of excess contribution." When you just withdraw money, it's treated differently for tax purposes than when you specifically request a return of excess contribution. For the original poster: call Fidelity back and specifically ask them to recharacterize your withdrawal as a "return of excess contribution." They should be able to do this for you if it's still within the same tax year. Make sure they understand you're correcting an excess contribution. If they process it correctly, you'll get a 1099-R that shows the distribution as a return of excess contribution.

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Sophia Nguyen

•8M

Yes, there's definitely a time limit. You have until the tax filing deadline (including extensions) to correct an excess contribution without incurring the 6% penalty. So for contributions made in 2024, you have until April 15, 2025, or October 15, 2025, if you file an extension. If you discover an excess contribution after the tax filing deadline has passed, you'll unfortunately have to pay the 6% excise tax for that year. You should still remove the excess to avoid paying the penalty again in future years. Some people alternatively choose to "carry forward" the excess by contributing less in a future year, essentially applying the excess to that year's contribution limit, but you'll still owe the 6% penalty for the first year.

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Maya Patel

•8M

TurboTax actually handles this pretty well! When entering your IRA contributions, there's a section where it asks if you made excess contributions and if you've withdrawn them. Make sure to check "yes" for both. It'll then ask for the date of the excess contribution removal and any earnings associated with it. The key is making sure you have the correct documents from your brokerage showing it was an excess contribution removal specifically, not just a withdrawal. The software should generate Form 5329 properly if you input everything correctly.

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Mae Bennett

•5M

I went through something very similar last year and can relate to the stress you're feeling! The good news is this is definitely fixable, but you'll need to be persistent with Fidelity to get it handled correctly. First, call Fidelity back and ask to speak with someone in their IRA department specifically - don't just talk to general customer service. Tell them you need to "recharacterize" your withdrawal as a "return of excess contribution" for 2024. They should be able to do this since you're still in the same tax year. Make sure they understand you're correcting an excess contribution, not just making a regular withdrawal. Once they process this correctly, you'll get a 1099-R form that properly shows the distribution as a return of excess contribution. Any earnings that were generated on that excess contribution will be taxable income for 2024 and potentially subject to the 10% early withdrawal penalty if you're under 59½. Since you've already filed, you'll likely need to file an amended return (Form 1040-X) once you get the corrected documentation from Fidelity. The timing actually works in your favor since you caught this so quickly - there probably weren't significant earnings on the excess contribution during that short time period. Don't panic about the penalties - if Fidelity processes this as a proper excess contribution removal, you should be able to avoid the 6% excise tax. Just make sure you get the right paperwork from them showing it was handled correctly.

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