Excess contribution issue - Vanguard

[lem1955]

At the beginning of 2025 I was winding down my last consulting gig and made two small contributions to my ROTH IRA (just under $1,000 total). BY July I realized that my income for 2025 was going to exceed the limit for contributions to a ROTH, so I initiated a reversal of the contributions. The reversal happened. The money went back to the Vanguard taxable account, as well as $1,775 additional funds. I thought, wow! But didn't look into it at that time. I received my 1099-R for that account last week, and called Vanguard to explain the taxable $1,775 from a ROTH. After a couple of hours on the phone with a person out of her depth and half-baked answers from a higher up, I finally got to someone who could understand that $1,775 excess return after three months was not reasonable on less than a $1,000 contribution. I've been assigned a case number and was told this will be resolved in 3-5 days and a new 1099-R will be issued. Update to come when that happens.

 

[COcheesehead]

I don’t know how Vsnguard does it, but Fidelity has an easy to use online process for backing out an over contribution and the tool calculates the earnings in real time so you can see exactly what will transfer back. I did it once and it took just a few minutes with no issues.

 

[Koolau]

Did that $1775 actually end up in a location at Vanguard you could access? I suppose it IS possible to make that kind of gain, depending on the underlying fund. But if so, Vanguard should be pushing said fund as "Fund of the Decade."

 

[big-papa]

I don’t know how Vsnguard does it, but Fidelity has an easy to use online process for backing out an over contribution and the tool calculates the earnings in real time so you can see exactly what will transfer back. I did it once and it took just a few minutes with no issues.

Yes they do - I made a mistake with my HSA a few years ago. Worked exactly as expected and was easy peasy. I even managed to do it before the deadline which would have resulted in a penalty.

Cheers

 

[lem1955]

Vanguard is still working on unwinding the mistakes they made doing a reversal of contributions to my ROTH. It has been frustrating trying to reach people who can help. Most of the time to only hear, "the case is still in progress." Most recently i was told the case is closed, but the 1099-R is still incorrect. They told me not to worry, the form will be corrected despite the case being closed. I'm supposed to wait two weeks. Arghhh.

 

[Koolau]

Vanguard is still working on unwinding the mistakes they made doing a reversal of contributions to my ROTH. It has been frustrating trying to reach people who can help. Most of the time to only hear, "the case is still in progress." Most recently i was told the case is closed, but the 1099-R is still incorrect. They told me not to worry, the form will be corrected despite the case being closed. I'm supposed to wait two weeks. Arghhh.

That's really unfortunate. I hear (here) that Vanguard's help desk is useless though I've not experienced that myself. I'm hoping this w*rks out well for you. DO keep us posted. We're invested now.