Same regulation, different reporting
The corrective distribution amount is identical for prior-year and current-year — same formula, same statutory window. The difference shows up at filing time.
Side-by-side: current-year corrective distribution vs prior-year carry-forward
A “current-year corrective distribution” (under §408(d)(4) before the deadline) and a “prior-year carry-forward + 6% excise” (where the deadline has passed) are the two structurally distinct outcomes:
| Dimension | Current-year (§408(d)(4) corrective distribution) | Prior-year (carry-forward + §4973(a) excise) |
|---|---|---|
| Statutory authority | IRC §408(d)(4) | IRC §4973(a) |
| Deadline | Apr 15 of T+1 (or Oct 15 of T+1 with timely-filed return / Form 4868 per §301.9100-2(b)) | Annual — “determined as of the close of the taxable year” (each Dec 31 the excess remains) |
| Earnings (NIA) | Required — must distribute principal + NIA per §1.408-11(a)(1) | Not part of the excise calculation — the excess principal remains in the account and accumulates earnings tax-free (until eventual distribution) |
| Tax on principal | Roth: not taxable (basis return). Traditional: taxable only if previously deducted (the §408(d)(4)(B) condition). | No tax on the principal — the excise is the “tax.” If withdrawn later (after the timely window has closed), normal Roth ordering rules (basis-first) or Traditional taxability rules apply. |
| Tax on earnings (NIA) | IRA: taxable in the year the contribution was made. HSA: taxable in the year received. | No NIA reporting (earnings stay in the account). When the principal is eventually distributed, normal account-type rules apply. |
| 6% excise tax | None — corrective distribution removes the contribution from being “excess” | 6% of the smaller of (excess) or (year-end account value), every year the excess remains. Reported on Form 5329 Part III/IV/VII. |
| 1099-R coding | Code 8 (corrected in same calendar year) or Code P (corrected in T+1 by the deadline) | Not applicable — no distribution unless / until you eventually withdraw |
| Exit path | One transaction; clean. | Two paths: (a) absorb the excess in a future under-contribution year (Pub 590-A “Excess Contributions Withdrawn After Due Date”), or (b) withdraw principal at any time (no NIA reporting; principal taxability per account-type rules). |
Code 8 vs Code P on Form 1099-R
Code 8 — current-year correction
Excess contributed in tax year T, corrected in tax year T. NIA reported on year T return. 1099-R issued the following January.
Code P — prior-year correction
Excess contributed in tax year T, corrected in year T+1 (Jan 1 – Oct 15). NIA still reported on the year-T return — but the 1099-R arrives the January after the distribution. May require an amended year-T return if already filed.
What this means in practice
- If you correct in the same calendar year, the 1099-R lines up cleanly with your return.
- If you correct after Jan 1 but before filing your return, no amendment is needed — report NIA on the original return.
- If you correct after filing the return, file Form 1040-X to add the NIA as taxable income.
HSA differs — the year-of-inclusion rule (verbatim statute)
Per IRC §223(f)(3):
“Any net income described in subparagraph (B) shall be included in the gross income of the individual for the taxable year in which it is received.”— 26 U.S.C. §223(f)(3)
HSA NIA is taxable in the year received, not the year contributed. This is statute, not interpretation. So an HSA excess for tax year 2026 corrected in 2027 produces NIA includible on the 2027 return — opposite of the IRA rule.
TCJA killed conversion recharacterization (verbatim §408A(d)(6))
Worth restating because it's the most-misunderstood post-2017 IRA rule. The current statute, as amended by TCJA §13611:
“Taxpayer may make adjustments before due date — In general. Except as provided in subparagraph (B), if, on or before the due date for any taxable year, a taxpayer transfers in a trustee-to-trustee transfer any contribution to an individual retirement plan made during such taxable year from such plan to any other individual retirement plan, then, for purposes of this chapter, such contribution shall be treated as having been made to the transferee plan (and not the transferor plan). Special rules — … (iii) Conversions. Subparagraph (A) shall not apply in the case of a qualified rollover contribution to which subsection (d)(3) applies (including by reason of subparagraph (C) thereof).”— 26 U.S.C. §408A(d)(6) (read full statute)
- Excess Roth contribution (annual cap or MAGI phase-out) — TWO valid corrective paths: (a) §408(d)(4) corrective distribution with NIA, or (b) §408A(d)(6)(A) recharacterization to Traditional IRA (with NIA on the transferred amount). Both still legal post-TCJA.
- Botched Roth conversion (e.g., MAGI ineligible, market collapsed) — recharacterization is NO LONGER AVAILABLE per §408A(d)(6)(B)(iii). The conversion is locked.
Mis-stating this is the highest-impact accuracy risk on this site.
Also relevant
- When to file — same Apr 15 / Oct 15 windows for both prior-year and current-year corrections.
- Deadline matrix — the routing index showing how prior vs current changes the column you fall into.
- Form 5329 walkthrough — applies to either year if you missed timely.
- Form 8606 walkthrough — for the basis carry on nondeductible Traditional IRA prior-year excess.
- Run the NIA calculator — same NIA formula either way; only the reporting year differs.
Informational, not tax advice. Consult a CPA or Enrolled Agent before acting on a corrective distribution.