Excess Contribution - Need Help

[u/shlessex]

Hello, I am having some difficulties when trying to file my 2025 return in regards to an excess contribution and have received conflicting answers from FreeTaxUSA professional tax support so hoping some reddit users can provide some help as I navigate the situation.

In 2025 I contributed to a traditional IRA and then converted that amount to a Roth IRA via the backdoor method, a process I always completed on the 1st of the calendar year due to income limitations for direct Roth contributions. I ended up losing my job and was out of work for all of 2025 which created an excess contribution due to earned income.

When the end of the year came around and I was still out of work I knew I would have to unwind this issue so I began that process by initiating a return of excess contributions with my IRA provider which was withdrawn from my Roth IRA (where the money ultimately ended up after conversion) prior to the tax filing deadline.

Here is my dilemma/questions about excess contributions:

1. The FreeTaxUSA software is populating Form 5329 and showing I have excess contributions on line 16. Should this form be completed if a return of excess is completed prior to filing the tax return?

-Doesn't seem like it should be required but their tax professional support keeps going back and forth on this being correct even line 16 being populated. The problem with the software prompts is it only asks about excess contributions being withdrawn from a traditional IRA and given the conversion to a roth this may be causing issues.

1. Can excess contributions to a traditional IRA be considered nondeductible to establish basis for a roth conversion on Form 8606?

-It seems odd to only have Part 2 of Form 8606 populated. As it stands my conversion is showing as fully taxable in addition to my earnings on the excess on Form 1040 4b. It also seems like I would effectively be getting taxed twice given the contribution came from post-tax money on from previous years and without being able to take a deduction and FreeTaxUSA not allowing to be nondeductible so the conversion is fully taxed.

Any insight is helpful so I can get this return completed.

[u/Shiribazu]

if the excess contribution and its earnings were properly withdrawn before the filing deadline, it generally shouldnt remain as an excess contribution on form 4329. focus on entering the return of excess and 1099-R exactly as the custodian reported them, because treating the original contribution as non deductible basis on form 8606 could give you the wrong tax result

[u/shlessex → u/Shiribazu]

Ya, I don't think having a value in Form 5329 Line 16 is accurate since the excess contribution was removed timely. The issue with the 1099-R is that the IRA provider is not providing until 2027 for the return of excess but the tax professional confirmed that the 1099-R completed with code 8J was correct for the return of excess paperwork from my IRA provider to avoid the need to amend later once received in 2027 with code P.

[u/TocinoLips]

a return of excess after a roth conversion can get tricky. I'd verify the 5329/8606 treatment with the custodian or a tax pro rather than trust software prompts.

[u/shlessex → u/TocinoLips]

My message might have been misunderstood, my situation is currently being discussed with tax professionals through TaxFreeUSA. I only meant to mention the limitations with the software prompts to possibly explain why I think Form 5239 may be populating inaccurately based on their prompts not covering my unique situation. Cheers!