Yes, you likely will receive a 1099-R and you do need to report it on your tax return, even though you fixed the overcontribution. Here’s the breakdown:
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1099-R: Since you removed the excess contribution along with any earnings, the custodian of your IRA will likely report the entire distribution (including both contribution and earnings) on a 2024 Form 1099-R with code P (excess contribution) and code 1 (early distribution). You’ll receive this form in 2025.
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Tax Reporting: Here’s how to report it on your tax return:
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2023 Tax Return: You won’t report the contribution or removal on your 2023 tax return because the contribution was intended for 2023 but made in 2024.
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2024 Tax Return: However, you will need to report the entire distribution (including both contribution and earnings) on your 2024 tax return. There are two ways to handle this:
- Wait for the 1099-R: When you receive the 2024 Form 1099-R in 2025, report the total distribution amount on your 2024 tax return. Since the code indicates an excess contribution, you shouldn’t owe any taxes or penalties on the contribution amount itself. However, you might owe taxes on any earnings that accrued on the excess contribution while it was in your IRA.
- Report the Excess Contribution Now (Optional): You can also choose to report the excess contribution and its removal on your 2023 tax return using Form 5329 (Additional Taxes on IRAs, Other Qualified Retirement Plans, and Modified Endowment Contracts). This approach might be helpful if you want to avoid any confusion or potential delays when you receive the 1099-R next year.
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Here are some resources that might be helpful:
- Instructions for Forms 1099-R and 5498 (2024): https://www.irs.gov/instructions/i1099r
- How to handle2023 Excess Traditional Nondeductible IRA Contribution all contributions done in 2024? : https://ttlc.intuit.com/community/tax-credits-deductions/discussion/how-to-fix-the-mistake-of-removing-the-excess-contribution/00/3000613
- Form 5329: https://www.irs.gov/forms-pubs/about-form-5329
Remember, it’s always best to consult with a tax professional for specific advice on your situation. They can help you determine the best way to report the excess contribution and removal on your tax return.