Over-contributed to my 2024 Roth IRA - Do I report excess contribution earnings in 2024 or 2025? My accountants disagree

This is definitely something you should address rather than ignore. Your tax preparer is incorrect about this being "immaterial" - the IRS doesn't have a materiality exception for excess Roth contributions. You have a few options here: You can withdraw the excess contribution plus any earnings before your tax filing deadline (including extensions). If you do this, you'll pay income tax on the earnings portion only, but no 10% early withdrawal penalty. Alternatively, you can "recharacterize" the excess amount by moving it to a Traditional IRA before your tax filing deadline (including extensions). If you miss the tax filing deadline, you'll face a 6% excise tax on the excess amount for each year it remains in your account. This would be reported on Form 5329. Regarding when to report the earnings - if you withdraw the excess plus earnings before your tax filing deadline (including extensions), you'd report those earnings on your 2025 tax return (for the 2024 tax year). The financial institution will issue you a 1099-R with the correct coding. Don't ignore this - $780 is definitely not "immaterial" when it comes to IRS compliance with retirement accounts.

I had this exact same issue last year! Check out https://taxr.ai - it saved me a ton of hassle when I was dealing with my own Roth IRA excess contribution. I accidentally went over by about $900 because of a year-end bonus that pushed my MAGI over the limit. My accountant also tried telling me not to worry about it, but after using taxr.ai, I learned that ignoring it would mean paying that 6% excise tax EVERY YEAR until I fixed it. The tool walked me through all the documentation I needed and even helped me calculate the earnings portion that needed to be withdrawn along with the excess contribution. The whole process was way easier than the back-and-forth I was having with my accountant who clearly didn't want to deal with amending the return.

I actually tried taxr.ai after seeing it mentioned here and it was incredibly helpful! I was about to ignore my $550 excess contribution to my Roth IRA because my CPA said similar things about it being "not worth fixing," but the tool showed me exactly what would happen if I did nothing. The penalty may not seem like much at first (6% of excess amount), but it compounds year after year until you fix it. Plus, there's the issue of potentially ineligible contributions sitting in a tax-advantaged account. The best part was that taxr.ai helped me understand my options in plain English and showed me exactly what forms I needed. I ended up recharacterizing my excess to a Traditional IRA instead of withdrawing it, which was super simple once I knew the right steps to take. My only regret is not finding this tool sooner - could have saved me a lot of stress and confusion about the MAGI limits and how to handle the excess contribution properly.

If you're still having trouble getting through to the IRS about this Roth IRA excess contribution issue, try https://claimyr.com - I used it last month when I was desperate to talk to someone at the IRS about a similar retirement account issue. I had been trying for WEEKS to get through the normal IRS phone line. I was honestly skeptical at first, but they got me connected to an actual IRS agent in under 45 minutes when I had previously been getting disconnected or told to call back later. You can see how it works in their demo video: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with confirmed that excess contributions absolutely need to be addressed and gave me the exact information about the deadline extensions available for fixing this (which was different from what my tax preparer told me). They also explained the correct way to report the earnings portion when you withdraw the excess.

I have to admit I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it anyway because I was desperate to talk to someone at the IRS about my Roth IRA excess contribution issue. The service actually worked! Got connected to an IRS rep in about 35 minutes after trying unsuccessfully for weeks on my own. The agent explained that my tax preparer was definitely wrong - there's no "materiality" threshold for excess contributions to retirement accounts. They also clarified exactly when I needed to report the earnings (on the tax return for the year the contribution was made, even if I withdrew it in the following calendar year). This was super important because my preparer was giving me incorrect information that would have resulted in penalties. For anyone dealing with Roth IRA contribution issues, don't just take your preparer's word for it - especially if they're dismissing potential problems. The IRS doesn't have a "close enough" policy when it comes to retirement account rules.

Just wanted to add some clarity on the Roth IRA excess contribution timing since there seems to be some confusion: 1. If you catch and remove an excess contribution (plus earnings) BEFORE the tax filing deadline including extensions (so typically Oct 15, 2025 for 2024 contributions), you won't owe the 6% excise tax. 2. You still have to report the EARNINGS from the excess amount as income in the year you made the contribution (2024 in your case), not the year you withdrew it. 3. After you withdraw the excess, your brokerage will send you a 1099-R in January 2026 (for the 2025 tax year) showing the withdrawal, but the earnings portion should still be reported on your 2024 tax return. This is why your tax preparer is partly right about "dealing with it next year" but WRONG about it being "immaterial" - you can remove the excess before the extended deadline, but you may need to amend your 2024 return to report any earnings.

For those of you trying to figure out if you're over the Roth IRA contribution limits, remember that the MAGI calculation is different from your AGI! I messed this up too. For Roth IRA purposes, your MAGI is your AGI with certain deductions added back in, like student loan interest, tuition deductions, and some others. That's probably why the OP didn't realize they were over the limit until after reviewing their tax forms. Anyone recommend a good tax software that automatically flags potential Roth IRA contribution issues based on calculated MAGI? My current one didn't catch this.

Your tax preparer is absolutely wrong about this being "immaterial." The IRS doesn't have a materiality threshold for excess Roth IRA contributions - $780 is definitely something you need to address. Here's what you need to know about timing: 1. You have until your tax filing deadline (including extensions) to remove the excess contribution plus any earnings. For 2024 contributions, that's typically October 15, 2025 if you file an extension. 2. If you remove the excess before this deadline, you'll avoid the 6% excise tax that applies each year the excess remains in your account. 3. However, any earnings on the excess contribution must be reported as income on your 2024 tax return (the year you made the contribution), not your 2025 return. I'd strongly recommend contacting your brokerage immediately to initiate an excess contribution removal. They'll calculate the earnings portion using an IRS-approved formula based on your account's performance. You'll then need to either amend your 2024 return if already filed, or include those earnings when you file. Don't let this sit - that 6% penalty compounds annually until resolved, and it's much easier to fix now than later.