Form 1099R with Code PJ for withdraw excess ROTH Contribution

[workhard2022]

Case: 

Taxpayer P contributed $7,000 to his Roth IRA during 2024. In January 2025-before filing his 2024 individual tax return, he withdrew $6,000 after realizing that his 2024 income exceeded the Roth IRA contribution limit.

He received a Form 1099-R for tax year 2025 with the following information:

• Box 1 (Gross distribution): $6,000

• Box 2a (Taxable amount): $0

• Box 7 (Distribution code): PJ

Question: 

When I enter this Form 1099-R into ProConnect for his 2025 return, both Line 4a (IRA distributions) and Line 4b (taxable amount) show as $0. Is this correct?

I understand why Line 4b is $0, since Box 2a on the 1099-R shows zero taxable amount. However, I expected Line 4a to reflect the $6,000 distribution. I’m not sure whether I entered something incorrectly or if this is how ProConnect handles this situation.

Thank you!

[qbteachmt]

The issuer of the 1099-R is only concerned with reporting money Out. Not with what happened afterwards or if your taxpayer didn't take all necessary actions.

Since the taxpayer removed only $6,000 of the $7,000 and assuming there is growth or earnings in the account attributable to the excess contribution, you have two conditions. And over two years.

There still is an ineligible contribution of $1,000. Plus any earnings attributable, which get reported as taxable income. That contribution and the earnings are subject to a 6% penalty for tax year 2024. And if they don't correct it for 2025 tax year, it's penalized again for 2025 and new earnings are taxable.

Here's some guidance:

https://www.fidelity.com/learning-center/smart-money/overcontribute-to-an-ira

[workhard2022]

Thank you! I apologize for forgetting to mention that Taxpayer P was eligible to contribute $1,000 to his Roth IRA for 2024 (his 2024 MAGI was below the fully phased-out limit). In addition, there were no earnings on his Roth IRA contributions for 2024.

Based on this additional information, could anyone please help me with my original question?

[qbteachmt]

Okay, contributed $7,000 for 2024, but only eligible for $1,000. So, excess pulled out before the tax year filing deadline = moot. Not reportable, no 8606.

Again, the 1099-R codes are for the money Out. You fill in the worksheet for what actually happened, such as Return of Excess contribution and if there are taxable earnings that were removed. Or not removed, left to ride over the year end(s).

"there were no earnings on his Roth IRA contributions for 2024"

I'm surprised. That year 2024, S&P 500 had over 24% gain, DJIA was 15%, Russell 2000 was over 11%, and even Treasuries were 5% consistently. The taxpayer's Roth IRA account didn't grow at all? Because the IRS has the computation for Net Income Attributable to that contribution amount, based on the account's performance.

If this wasn't already entered in the 2024 tax return, here's the support for how it should have been done. The "P" indicates for the prior year, for reporting 2024 in 2025 or not reporting at all, as it is just informational and was handled properly for 2024 already. This assumes there is nothing to report in 2025, since you state there are no earnings to deal with.

I would double-check that with year end FMV and the IRS worksheet, of course. If he had contributed after Dec 31, 2024 and then realized that was an error, it would make sense that there are no earnings to remove and report as taxable.

https://accountants.intuit.com/support/en-us/help-article/retirement-benefits/common-questions-form-...

[workhard2022]

Thank you so much. I was a bit worried about Line 4a (IRA distributions) on form 1040 because if I leave it blank. Would that trigger an IRS notice, considering the IRS also received a Form 1099-R showing a $6,000 gross distribution in Box 1?

[qbteachmt · Accepted solution]

Are you entering something into 2025 that is moot and for 2024?

If there were taxable earnings, that would go on the 2024 return. I think Code J and 8. Code P and 8 is for prior year. If it is on the prior year tax return, you don't also enter on the current year being prepped.

But you stated there was no change in the account and the excess was removed before the deadline, so it's all moot. Nothing left in the account that would be subject to 6% excise, nothing taxable, nothing to remove in a later year.

[workhard2022]

Thanks. I am concerned that leaving form 1040, Line 4a and Line 4b blank may trigger an IRS notice, since the IRS may wonder where the $6,000 reported on the 2025 Form 1099-R went (IRS should have a copy of the 2025 form 1099R in their database). If the IRS does raise a question regarding the 2025 individual tax return, I guess can assist the client in providing an explanation.