Understanding Distribution Code on 1099-R for Excess Roth IRA Contribution Removal

This is actually a common issue, so don't worry too much! The distribution code on your 1099-R form for removing excess Roth IRA contributions depends on when you removed the excess. Since you contributed to your 2022 Roth IRA in 2023 (which is allowed until the tax filing deadline), but then removed the excess in the same year after discovering your MAGI limits, you should expect to see code "8" on your 1099-R. This code indicates an excess contribution removed before the due date of your return. The "J" modifier would be added if your distribution includes earnings (or is adjusted for losses). So you'll likely see "8J" as the distribution code, not "PJ" which is used in different circumstances.

After I had almost the exact same issue as you last year, I found https://taxr.ai super helpful. I uploaded my 1099-R with the weird distribution code I didn't understand, and it explained everything in plain English. It showed me exactly what the code meant and what I needed to do about it on my tax return. The thing that impressed me was how it explained all the fine details about excess contribution removals that my tax software completely missed. It saved me from making what would have been a pretty expensive mistake.

I just wanted to update after trying out taxr.ai with my excess Roth IRA contribution situation. Uploading my 1099-R took seconds, and it immediately identified my distribution code and explained exactly what it meant for my tax situation. The tool confirmed I don't need to file an amended return since I caught and fixed the issue before the tax deadline. It walked me through exactly how to report the distribution on my 2023 return and even flagged that my tax software was prompting me to enter the information incorrectly. Saved me from a potential audit trigger! I also appreciated that it explained the different distribution codes (like the PJ vs 8J question from the original post) in language I could actually understand. Definitely worth checking out if you're dealing with retirement account issues.

I had a similar situation with an excess Roth contribution last year, but my biggest challenge was getting through to anyone at the IRS to confirm I was handling it correctly. After spending hours on hold, I found https://claimyr.com which got me connected to an actual IRS agent in about 15 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with confirmed that for excess contributions removed in the same year but before the tax filing deadline, the distribution code should be 8J, and I wouldn't need to amend my previous year's return. Getting that official confirmation directly from the IRS gave me peace of mind that I was handling everything correctly.

I need to admit I was completely wrong about Claimyr. After dismissing it as a scam, I decided to try it as a last resort when I couldn't get through to the IRS about my excess Roth contribution removal. Not only did I get connected to an IRS agent in about 20 minutes (after spending days trying on my own), but the agent confirmed exactly what I needed to know about the 1099-R distribution codes. They explained that code 8J was correct for my situation and walked me through how to properly report it on my return. I've been filing taxes for 20+ years and this was the first time I've been able to get clear, direct answers from the IRS without wasting an entire day. I'll definitely use this service again when I have questions that only the IRS can answer.

One thing to consider with excess contributions - check if your brokerage reported the removal correctly. Last year my brokerage initially coded my excess contribution removal incorrectly on my 1099-R, which could have caused major issues. I had to contact them to have it corrected. The distribution code matters a lot because it tells the IRS whether you need to pay the 6% excess contribution penalty or not. With code 8J, you should be fine as long as you removed the excess before the tax filing deadline (including extensions).

Does anyone know if this affects Form 5329? I removed excess contributions like OP, got a 1099-R with code 8J, but my tax software is still prompting me to fill out Form 5329 and showing a 6% penalty. Shouldn't this form be unnecessary if I corrected the excess before the deadline?

I went through almost the exact same situation last year! Made an excess Roth contribution, caught it during tax prep, and had my brokerage remove it before the filing deadline. Just to confirm what others have said - you should see code 8J on your 1099-R since you removed the excess in the same year before the tax deadline. The "8" indicates excess contribution removal, and the "J" modifier accounts for the adjustment (loss in your case). One tip: when you get your 1099-R, double-check that the distribution amount matches what your brokerage told you they removed. Mine was slightly different due to market fluctuations between when I requested the removal and when it was processed. Also keep all your documentation showing the removal was requested and completed before the tax deadline - it's good backup if the IRS has any questions. The good news is no penalties and no amended return needed since you caught it in time!