Double counting ROTH IRA excess contributions

[Opfor77]

30 year old client had a $2,723 excess ROTH IRA contribution carried forward to 2025 from 2024, because his 2024 earned income was only $4,277. He already contributed $7,000 to his 2025 ROTH IRA from his 529 QTP. He is not interested in dealing with the return of excess for 2025.  He wants to just pay the $163 6% fee, and fix it for 2026.  The 2024 amount of $2,723 that was carried forward to 2025 should carry forward to 2026.  I keep getting a line 26 (excess ROTH IRA contribution credit) error, because on the IRA contribution worksheet, line 27 (total ROTH IRA contributions) is doubling line 26 to $5,446.  Line 26 shows $2,723, line 27 shows $5,446.  When I change line 26 to $0, line 27 says $0, a line 26 error pops up saying it should be $2,723. When I change to $2,723, it says it should be $0!!!!  What am I missing?!?!?!?!

[IntuitAmyC2]

You have 2024 excess which is often absorbed into the 2025 contribution but your client chose to do the full amount. Leaving the 2024 excess:

• Line 26 should be the 2024 excess
• Line 27 double line 26 means the software thinks it also a 2025 excess
  • Check 5329 Part IV, line 18 $2723 prior year, 
  • lines 20-22 all $0
  • line 23 total excess - this can cause the double count - it should be zero since no current excess
  • line 24 $2723

You may need to delete the IRA contribution worksheet, it could have some data stuck. If you show the $2723 excess for 2024 and if he earned more than $7k, the 2025 would not have an excess but must be labelled s rollover.

Line 26 and line 27 need to be $2,723 to get the correct tax on the 2024 excess. Good luck getting the client to reduce this year's contribution by $2723.

[qbteachmt]

"which is often absorbed into the 2025 contribution"

Only if the taxpayer took the action to recharacterize it as the next tax year. Otherwise, it carries over every year end and is taxable at 6% every year until it is resolved.