The problem is with the software. The withdrawal of the excess contribution is not taxable. The earnings are taxable. IRS first says put it on Form 1040 1 h but then on 1 h it says don't put excess contributions on this line - put it on 4. This is not an uncommon scenario although most people probably don't see the 5498's when preparing the return and would not think to ask the client about it. Perfect storm of facts which caused this to not be taxable. The income will be on the return - just maybe not on the perfect line. One simple item taking hours....