How do I report excess Roth IRA withdrawal on tax return? Totally confused!

I contributed $8,000 to my Roth IRA back in 2023 through Fidelity. The money just sat there in a money market fund, never actually invested in anything. Found out after the fact that I made way too much money last year to qualify for Roth contributions (earned around $165K). Last month (January), I realized my mistake and withdrew the $8,000, but Fidelity withheld $800 for taxes. Now I'm completely lost on how to report this on my 2025 taxes. Do I report the withdrawal? What forms do I need? Will I owe penalties since I exceeded the income limits? The withholding is confusing me too - do I get that back? Seriously about to lose my mind trying to figure this out. Any help would be so appreciated!

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18 comments

Amina Toure

•8M

This is actually pretty straightforward to fix! What you're describing is called an "excess contribution" to a Roth IRA, which happens when you contribute more than allowed based on your income. The good news is that you took the right step by withdrawing the excess contribution. Since you withdrew it before the tax filing deadline for the year of the contribution, you won't face the 6% excess contribution penalty that would normally apply. For your tax return, you'll need to report both the contribution and the withdrawal. The $800 that was withheld will be reported on your tax return as federal income tax withheld, and you'll get credit for that withholding. You should receive a 1099-R from Fidelity showing the distribution and the withholding amount. The earnings (if any) on the excess contribution would be subject to income tax and potentially an early withdrawal penalty if you're under 59½, but since you mentioned it wasn't invested and just sat in the account, there may not be any earnings to worry about.

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Amina Toure

•8M

For Form 8606, it's generally not required for Roth IRA excess contribution withdrawals if there were no earnings. Form 8606 is primarily for reporting nondeductible contributions to traditional IRAs and for Roth conversions. Regarding state taxes, the withholding is typically only for federal taxes unless you're in a state that has automatic state withholding as well. You'll need to check your 1099-R to see if any state tax was withheld. If not, and your state has income tax, you may need to account for the withdrawal on your state return, though many states follow the federal treatment for retirement account corrections.

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Natasha Volkova

•8M

After struggling with a similar situation, I discovered taxr.ai (https://taxr.ai) and it was a game-changer for sorting out my IRA mess. I contributed too much to both traditional and Roth IRAs last year, and I was completely confused about how to handle it. Their AI instantly analyzed my 1099-R forms and explained exactly how to report everything. The tool walked me through each line of the tax forms I needed to complete and explained what each entry meant - way clearer than the confusing IRS instructions. It even showed me how to handle the withholding properly so I didn't miss out on getting that money back.

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Natasha Volkova

•8M

It handles multiple accounts perfectly - you can upload all your 1099-Rs and other tax documents, and it consolidates everything while keeping track of the different accounts separately. It even flags potential issues like excess contributions across multiple accounts that might otherwise go unnoticed. For earnings calculations, absolutely! It can determine the taxable portion of withdrawals, including any earnings on excess contributions that need to be reported. It breaks down the calculations step-by-step, so you understand exactly what portion is considered earnings versus your original contribution. This is super helpful since brokers often don't clearly separate these amounts on statements.

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Emma Davis

•8M

Just wanted to update everyone - I tried taxr.ai after seeing it mentioned here and it actually sorted out my similar Roth IRA issue in minutes! I uploaded my 1099-R and it immediately identified that I had an excess contribution situation and showed me exactly how to report it on my return. The best part was it clearly explained how much of my withdrawal was the original contribution vs earnings (which I had no idea how to calculate before) and showed me where each amount goes on my tax forms. It even confirmed I'd get my withholding back as a refund! Saved me hours of research and probably an expensive call to my accountant.

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CosmicCaptain

•8M

If you're still having trouble getting answers from the IRS about this Roth IRA situation, I'd recommend using Claimyr (https://claimyr.com). I was in the exact same boat last year with an excess contribution, and needed to speak to someone at the IRS to confirm how to report everything correctly. After waiting on hold for over an hour and getting disconnected twice, I found Claimyr and decided to give it a shot. They got me connected to an IRS agent in about 20 minutes instead of the 2+ hours I was experiencing on my own. There's a video that explains how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke to walked me through exactly how to handle the excess contribution withdrawal and the withholding on my return, which gave me much more confidence than just guessing.

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CosmicCaptain

•8M

It works by continuously calling the IRS and navigating through all the automated menu systems for you. Once they get through the queue, they call you and connect you directly to the IRS agent they've reached. Basically they handle all the waiting and menu navigation so you don't have to sit there for hours. I spoke with a real IRS representative who had access to my tax records and could answer my specific questions about how to report my excess IRA contribution. It wasn't an automated system or a third-party representative - it was an actual IRS employee who handled my questions about the 1099-R reporting and withholding issues.

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Isabella Ferreira

•8M

I have to eat my words. After being super skeptical about Claimyr, I decided to give it a try since I was desperate for answers about my own IRA withdrawal situation. Honestly, I'm shocked - it actually worked! I got connected to an IRS representative in about 15 minutes when I had previously spent over 2 hours trying on my own and getting nowhere. The agent clarified exactly how to handle the excess contribution on my return and confirmed I'd get credit for the withholding. For anyone dealing with complicated IRA issues like this, being able to speak directly with the IRS and get definitive answers saves so much stress. Definitely worth it just for the peace of mind knowing I'm doing it right.

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Ravi Sharma

•8M

I'm in Massachusetts, which generally follows federal treatment but has a few differences for reporting. In California, they mostly follow the federal treatment for excess contribution withdrawals, but you should still report the distribution on your CA return. The main thing is to make sure the state knows the nature of the withdrawal (correcting an excess contribution) so it's not mistakenly treated as an early distribution subject to penalties. The tax software should handle this correctly if you input the 1099-R information properly, but it's worth double-checking the state section specifically.

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