Any tax guys here? Roth question

Doing my taxes and Turbo Tax indicates I had an excess Roth contribution, but can be fixed by removing the excess before the 4/15 deadline.
I fill out the removal request with Vanguard, they send me a deposit for the overage requested AND a 2nd deposit for gains?

So my questions are:
- Do I need an updated 1099 for 2023 with this new info?
- Are these overage "gains" supposed to be claimed for 2023 or 2024?

Can't find clear answer,

If I claim the gains this year, it further increases my AGI and the "overage" will further increase, putting the situation into a loop of needing to withdrawal more money?

If Turbo Tax's help forum doesn't help, I suggest speaking with an experienced, local tax preparer.

You want the right answer, the first time.

You should be able to tell when the gains occurred. Most likely the gains were for 2023 but look at the statement. It shouldn't be hard to figure out since you should have access to your account information which most likely has monthly reports.

You don't need to report Roth gains for income taxes so the question most likely is moot, but double check your records. I don't think you need a 1099 on a Roth unless you are withdrawing from it. Roth accounts are typically not subject to any taxes. That is the whole point of the Roth account. No tax on gains, no tax on withdrawals.

Roth gains are taxable if you make a withdrawal prior to retirement age. Contributions can always been withdrawn tax free, since they are post-tax contributions to begin with.

OP, they should've only refunded your contributions, not any gains at all. I believe the form you need is 8606. It allows you to enter your cost basis (your contributions) and your withdrawal amount. Since your withdrawal will be less than your cost basis, you'll owe $0 taxes on that $ once you complete the correct form. Your tax program will have the form, but you'll likely have to search for it, it probably will not prompt you to fill it out on it's own.

Close. He has to take out the gain attributable to the excess contribution. It's a simple calculation and doing so SHOULD NOT put you into a perpetual loop. You take out the two pieces, apply any tax, done. If you take additional funds out of your ROTH to cover, put that can of worms back on the shelf.

Deal with the tax liability out of your current bank accounts and not any retirement accounts. JMO

You will get hit with a tax liability and 10% penalty on any gain.

You can also leave the excess in the account, use the excess as part of your 2024 contributions, reduce your actual $ into the account by prior year overage. 7000 limit, 1000 overage, 6000 contribution in 2024. There is a 6% excise tax on any excess contributions. Have to crunch some numbers to see which method is most favorable.

This has a pretty decent explanation... https://www.fool.com/retirement/plans/roth-ira/excess-contribution/

Enlist the help of a tax professional. Roth's are a swamp.

I was just looking at the 5 year rule last month and was surprised to see that if you add a roth conversion to a roth that's been open for over 5 years and you're over 591/2 the amount you convert has it's own new 5 year rule for each conversion you make. If you take the principle out before the 5 years you'll owe a 10% penalty. They use Jan. 1 as the start date for the year you convert so if you do it Dec. 31 it's only 4 years 1 day.


https://www.investopedia.com/roth-ira-conversion-rules-4770480


See beware of 5 year rule.

Yeah I suppose you're correct on that. I'm past retirement age so my frame of reference has changed!
I'm pretty sure this is all a tempest in a teapot. The OP didn't say what the ill gotten gains amounted to but I bet it was less than $100. If was me I'd just leave it in the account and not worry about it. I doubt the IRS is going to fire up the black helicopters for less than $100.

Yeah how much is this? My cpa has said many years in a row to not fool with the corrections to my taxable account because it’s not worth it. They send some every year way past when I file. Some bs about recharacterizing some gains. He said just cut a check if the irs makes it an issue. We aren’t taking about thousands though. It’s never been made an issue.

This helped, thx!

It's not a big tax delta, the "gain" on the excess contribution is $800, so the tax would be $200.

The issue is Roth contribution limits are on a sliding scale based on AGI, so the extra $800 would make my AGI higher, further reducing the Roth contribution limit, and making the excess amount larger, throwing the whole calculation into another excessive withdrawal.

Vanguard finally replied that since the withdrawal is in 2024, they will report the "gain" next year for the 2024 tax year.

Appreciate all the input, all this seems unnecessarily complicated. Wouldn't be cost effective to pay a tax professional over $200.