IRA contribution adjustments
These events can be complicated, are tax-reportable, and may be taxable. We recommend you review these with a qualified tax professional before requesting them.
IRA contribution adjustments help you correct mistakes, stay compliant with IRS rules, and avoid potential tax penalties.
Processing takes 1–3 business days and you'll get a confirmation email when it's complete. If rejected, we’ll email you with the reason and next steps.
A recharacterization moves a contribution between Traditional and Roth IRAs. It’s commonly used when you:
On March 3, 2024 you contributed $7,000 to your Roth IRA. When you filed your taxes with your tax advisor on April 5, 2025, you realized you weren’t eligible to contribute directly to the Roth IRA and your tax advisory suggested a recharacterization.
Because you filed your taxes before the April 15th deadline for 2024, you are eligible for an automatic 6-month extension to complete the recharacterization.
If you made the original contribution at another firm, you’ll need to contact that firm directly to request a recharacterization. Robinhood can only process a recharacterization if the contribution was either:
If the contribution was transferred to Robinhood, we may be able to process the recharacterization. You may need to contact your former firm to gather details about the original contribution and account balances to help calculate the net income attributable (NIA). This information is required when completing your request via Docusign.
There isn’t an Early Match Removal Fee charged for recharacterizations, since the funds remain within an IRA. You generally have the following options when submitting your recharacterization:
We can’t re-grant an IRA match if you choose to have it removed from your IRA.
When you recharacterize a contribution, it’s a non-taxable event, but it must still be reported.
Shows both the original contribution and the recharacterized amount for the appropriate tax years.
If your recharacterization involves multiple tax years, you’ll receive a separate 1099-R for each year.
IRS Form 1099-R is delivered by January 31 of the year following the activity that generated the form. IRS Form 5498 is delivered by May 31 of the year following the activity that generated the form.
You contributed $7,000 to your Roth IRA on January 24, 2025 and designated it for the 2024 tax year. After filing your taxes, you realized you weren’t eligible to contribute directly to a Roth IRA and recharacterized the full contribution +/- any Net Income Attributable to your traditional IRA. You’ll receive the following forms:
Liquidations and withdrawable cash
If your request is from a managed IRA, Robinhood Strategies will liquidate the requested amount within 1-3 business days and we’ll process your recharacterization upon settlement.
Investment minimums and $0 balance
The value of your managed IRA must be at least $50 for Robinhood Strategies to manage your account, or it may be subject to deactivation. For full recharacterizations, we’ll subtract any accrued advisory fees from your requested amount.
Net Income Attributable (NIA) and residuals
If your managed IRA value drops before we process a full recharacterization, we’ll adjust the amount accordingly by reducing the NIA amount provided. If the value of your managed IRA increases or new funds (ex. dividends or interest) post, you’ll need to submit a new request.
Requests can be rejected for a variety of reasons. See common reasons below for further information.
A return of excess removes extra or ineligible IRA contributions to avoid a 6% penalty, assessed annually by the IRS for each year the excess remains.
Returning an excess contribution doesn’t change your annual contribution limit. The full amount you originally contributed will still be reported on your IRS Form 5498 for that tax year, and your contribution total at Robinhood won’t be reduced, reset, or increased.
On March 3, 2025 you contributed $7,000 to your Roth IRA at Robinhood. You later realized you had also already contributed $7,000 at your prior IRA provider before transferring to Robinhood and have now over contributed. Your tax advisor recommended a return of excess of the $7,000 and filed your taxes on April 2nd, 2025.
Because you filed your taxes before the April 15th deadline for 2024, the IRS grants you an automatic 6-month extension to complete the return of excess.
We don’t charge an Early Match Removal Fee as part of a return of excess. However, future withdrawals from your IRA could still trigger an early match removal fee if they fall within the match holding period. You generally have the following options when submitting your return of excess:
We can’t re-grant an IRA match if you choose to have it removed from your IRA.
If positive Net Income Attributable (NIA) included an IRA Match amount, you could pay tax now and may still owe a fee later if you take further distributions from your IRA without meeting the 5 year match holding requirement. If you’re unsure, consider speaking with a tax professional.
Return of excess and early or normal IRA distributions are reported differently on IRS Form 1099-R. If you’ve contributed more than the allowed limit, taking a regular distribution won’t correctly resolve the excess.
If you’ve already taken an early or normal distribution instead of submitting a return of excess request, Robinhood unfortunately can’t change our original reporting of it. However, you can work with a tax professional to reconcile the difference when filing your tax return.
Returning an excess contribution doesn’t change your annual contribution limit. The full amount you originally contributed will still be reported on your IRS Form 5498 for that tax year, and your contribution total at Robinhood won’t be reduced, reset, or increased. If you haven’t already maxed out your IRA contributions, including any excess returned, you’ll still be able to contribute up to the maximum for the intended tax year.
If you made the excess contribution at another firm, you’ll need to contact that firm directly to request a return of excess.
Robinhood can only process a return of excess if the contribution was either:
We may be able to process the return of excess if the contribution was transferred to Robinhood. You’ll need to contact your former firm to gather details about the original contribution and account balances to help calculate the NIA. This information is required when completing the return of excess request via Docusign.
Yes. If you need to remove an invalid rollover amount due to an excess contribution to a workplace plan, Robinhood can process a return of excess.
We may ask for additional documentation, such as a letter or statement from the plan administrator, confirming the excess contribution and rollover details.
Liquidations and withdrawable cash
If your request is from a managed IRA, Robinhood Strategies will liquidate the requested amount within 1-3 business days and we’ll process your transaction upon settlement.
Investment minimums and $0 balance
The value of your managed IRA must be at least $50 for Robinhood Strategies to manage your account, or it may be subject to deactivation. For full withdrawals, we’ll subtract any accrued advisory fees from your requested amount.
Net Income Attributable (NIA) and residuals
If your managed IRA value drops before we process a full removal, we’ll adjust the amount accordingly by reducing the NIA amount provided. If the value of your IRA increases or new funds (ex. dividends or interest) post, you’ll need to submit a new request.
When you return an excess contribution, it's potentially a taxable event if it includes Net Income Attributable (NIA). Robinhood is required to report details of the return of excess on IRS Form 1099-R. IRS Form 5498 isn't issued for returned excess contributions because the funds are removed from the IRA rather than being contributed or rolled into another IRA.
IRS Form 1099-R
Excess Contribution Codes (Box 7):
In certain scenarios 2 codes will appear in Box 7:
| Account type | Under age 59 1/2 | Age 59 1/2 or over (for removal afterdeadline) |
| Traditional IRA | Code 1 | Code 7 |
| Roth IRA | Code J | Code T |
Excess contributions returned after the applicable IRS deadline won’t include Net Income Attributable (NIA), federal or state tax withholding, or a timing code (such as Code 8 or P) on your Form 1099-R. Consult your tax advisor for help reconciling.
Form 1099-R is delivered by January 31st of the year following the activity that generated the form.
If your return of excess involves multiple tax years, you’ll receive a separate 1099-R for each year.
Requests can be rejected for a variety of reasons. Review common rejection reasons below and how to fix them.
You contributed $7,000 to your Roth IRA on January 24, 2025 and designated it for the 2024 tax year. You later contributed another $7,000 to an IRA at a separate brokerage. After filing your taxes, you realized you contributed $7,000 in excess to all IRA and requested a return of excess for the full $7,000 +/- Net Income Attributable. You’ll receive the following forms:
If your return of excess involves multiple tax years, you’ll receive a separate 1099-R for each year.
You contributed $7,000 to your Roth IRA on January 24, 2025 and designated it for the 2024 tax year. You later contributed another $7,000 to an IRA at a separate brokerage. After filing your taxes, you realized you contributed $7,000 in excess to all IRA and requested a return of excess for the full $7,000 +/- Net Income Attributable. You’ll receive the following forms:
When you recharacterize or return an excess IRA contribution, the IRS requires you to adjust for any investment gains or losses that happened while that contribution was in your account. This adjustment is called Net Income Attributable (NIA), which is the earnings or losses connected to the contribution you're adjusting or removing.
IRA contributions and their associated growth (or loss) can generally be considered as a package. If you remove the contribution or adjust it to another type of IRA, you also need to remove or adjust the related growth (or loss).
Review Worksheet 1-4 in IRS Publication 590-A for IRS method of computing NIA.
Robinhood doesn’t calculate Net Income Attributable (NIA) or provide adjusted balances. However, we can share your account balance as of a specific date if needed.
For help with this or other balance inquiries, please reach out to our support team.
Here’s a slightly revised formula used to calculate NIA:
NIA = (Contribution amount x (Adjust Closing Balance - Adjusted Opening Balance)) / Adjusted Opening Balance
Key terms
Contribution amount: The exact amount you’re recharacterizing or removing from your IRA.
Adjusted Opening Balance (AOB): Your IRA balance just before the contribution was made, plus the contribution being returned or recharacterized and plus any additional contributions made during the computation period (this includes rollovers, transfers, and recharacterizations).
Adjusted Closing Balance (ACB): Your IRA balance just before the contribution is removed or recharacterized, plus any distributions made during the computation period (including rollovers, transfers, and recharacterizations).
Computation period: The time between just before the contribution was made and when the return of excess or recharacterization is submitted.
Positive NIA (gains)
John contributed $6,000 to his Roth IRA in March 2024. Over time, his investments went up in value. When he decides to recharacterize the contribution:
NIA = $6,000 ($28,250 - $26,000) / $26,000 = $519.23
John must move $6,519.23 from his Roth IRA to his Traditional IRA to complete the recharacterization.
Negative NIA (losses)
Emma contributed $6,000 to her Roth IRA but was ineligible. Her investments lost value. When she decided to complete the return of excess:
NIA = $6,000 ($23,750 - $26,000) / $26,000 = -$519.23
Emma must move $5,480.77 to complete the removal of excess.
We understand this can be a confusing calculation. We recommend checking out IRS Publication 590-A or speaking to a qualified tax professional for additional clarification. Keep in mind, Robinhood doesn’t provide tax advice.
Recharacterization
Neither the contribution nor the NIA is reported as taxable income on the 1099-R for a recharacterization.
Return of excess
There isn’t a tax on the contribution removed, but any positive NIA amount is reported as taxable income on the 1099-R and may be taxable.
You have the option to request tax withholding from any positive earnings (Net Income Attributable) included in your return of excess contribution.This means a portion of the NIA provided can be withheld and sent to the IRS, and your state if applicable, helping reduce what you may owe when you file your taxes. Withholding isn’t required, and if you don’t elect, the full NIA amount will be distributed to your brokerage and reported as taxable income on your Form 1099-R.
To request withholding, be sure to indicate your election on the Docusign form Tax Withholding Election section.
A reclassification adjusts which tax year a contribution applies to, or can be used to classify a contribution as a rollover (or vice versa). It’s a flexible way to correct contribution intent, but some elections are irrevocable.
If you also plan to recharacterize or return the contribution, submit the reclassification first and then follow up with the next adjustment.
You contributed $6,000 to your Roth IRA on February 22, 2025 and designated it for the current year inadvertently. Your tax advisor filed your taxes with this contribution designated for 2024 and later noticed the discrepancy when filing your taxes in 2026.
Because the contribution was made between January 1 and April 15th, you’re able to reclassify it between the current or prior tax year, even though it’s past the tax filing deadline.
A reclassification can help if you made a mistake when selecting the type of contribution and chose rollover instead of current or prior year.
A reclassification can help if you made a mistake when selecting the type of contribution and chose current or prior year instead of a rollover.
Any election to reclassify a contribution as a rollover is irrevocable.
Reclassification requests under disaster relief must follow IRS eligibility rules. Robinhood doesn’t determine eligibility but will honor IRS guidance and review attestations accordingly.
If you're in an area affected by an IRS-approved disaster, you may be eligible to make a prior year IRA contribution beyond the usual tax deadline.
Robinhood supports this scenario with the following process:
The timing of your original deposit doesn’t determine when it’s reported but rather your final election after your reclassification. Reclassifying a contribution changes which tax year the contribution applied to, and this is reflected on IRS Form 5498.
You reclassify an eligible 2024 contribution to 2023. The contribution will now reflect on IRS Form 5498 issued for 2023, rather than 2024.
You reclassify an eligible 2024 contribution to 2025. The contribution won’t reflect on IRS Form 5498 issued for 2025, rather than 2024.
Changing from a rollover to contribution or vice-versa will change which IRS Form 5498 box the transfer applies to. Contributions are reported in Box 1 and rollovers are reported in Box 2.
If the reclassification happens after IRS Form 5498 is issued, we’ll send a corrected version, usually within 2-4 weeks.
You contributed $3,000 to your traditional IRA on January 3rd, 2025 and designated it for 2024 instead of 2025. You already had $4,000 in contribution in 2024.
After receiving your IRS Form 5498 by May 31st, 2025, you realized the mistake and reclassified the contribution to 2024. You’ll receive a corrected IRS Form 5498 generally within 2-4 weeks with the adjusted total of $7,000 in contributions for 2024 instead of $4,000.
Requests can be rejected for a variety of reasons. Review common rejection reasons below and how to fix them below.
We make every effort to process your request smoothly, but we’re required to follow certain rules and regulations.
If your request is rejected, we’ll typically send you an email explaining the reason, along with clear next steps. This often includes a new DocuSign form to help you correct and resubmit your request.
If your request is rejected for multiple reasons or was previously denied, you’ll receive a general rejection email without a new Docusign form. To understand all the reasons and avoid repeated delays, contact support and they can guide you through next steps to complete your request.
Check your withdrawable cash:
Close positions or wait for pending funds to settle
Make sure you're viewing the correct Robinhood IRA for your request. This applies to recharacterization and return of excess.
Double-check your IRA account number
To find your account number:
This applies to recharacterization, return of excess, and reclassification.
The contribution amount you're removing or recharacterizing, plus or minus your Net Income Attributable (NIA) calculation, must exactly match the total amount requested. This ensures accurate processing and proper reporting.
Make sure to double check the amounts provided and resubmit your request. This applies to recharacterization and return of excess.
Contribution and adjustment reporting is based on the specific tax year impacted.
Submitting a separate form for each tax year helps ensure accurate processing, proper reporting, and easier reconciliation when you file your tax return. This applies to recharacterization, return of excess, and reclassification.
Prior year recharacterizations and timely returns of excess with NIA cannot be processed after the IRS cutoff.
The IRS requires all timely recharacterization or return of excess requests to include a net income attributable (NIA) calculation.
Even if you selected No on the form regarding whether you've filed your tax return, your request is still considered timely if you've already filed or requested an extension, and it must include NIA.
Each reclassification must be all-or-nothing at Robinhood. You can't split a contribution between years or accounts.
Contributions can only be applied to the current or prior tax year and can’t be adjusted to a future (forward) tax year.
Contributions made after the tax filing deadline generally cannot be reclassified to the prior tax year, unless you're eligible for IRS tax relief in disaster situations