How do I remove an excess contribution that was made to the voluntary after tax solo 401k and was then converted to the Roth IRA?

This is a tricky situation because two different tax issues are stacked together:

1. An excess contribution was made to the voluntary after-tax Solo 401k.

2. That excess was then converted (in-plan Roth rollover or distribution/transfer) to a Roth IRA.

Here’s how the IRS generally requires you to fix it:

1. Identify the Excess Contribution

• The excess occurs if you contributed more than the Solo 401k annual limits (for 2025, $70,000).

• Voluntary after-tax contributions plus employee deferrals plus employer contributions cannot exceed the annual limit.

2. Correcting Excess in the Solo 401k

Normally, if the excess is caught before April 15 of the following year (plus extensions), the fix is:

• Remove the excess contribution plus earnings from the Solo 401k plan (not just the contribution).

• The distribution is reported on Form 1099-R for the year of the contribution.

3. Complication: Conversion to Roth IRA Already Done

Since you moved the after-tax funds to the Roth IRA, you now have two layers:

• The Solo 401k plan still has a record of the excess contribution.

• The Roth IRA received an ineligible rollover.

IRS guidance generally treats this as an “excess contribution to the Roth IRA” that must be removed.

4. How to Fix When the Funds Are in the Roth IRA

• You must contact the Roth IRA custodian and request a return of excess contribution (not a regular withdrawal).

• The custodian will return the excess plus earnings.

• The excess is reported on Form 1099-R (from the IRA custodian NOT the solo 401k plan) and the earnings are taxable in the year the contribution was made.

• You’ll also need to reflect the correction on your Form 1040 and, if necessary, amend if this is a prior year.

5. Forms and Reporting

• From the Roth IRA custodian: Form 1099-R showing return of excess contribution.

• On your tax return: Report the earnings portion as taxable income. If late, there may also be a 6% excise tax (Form 5329) until the excess is removed.

Action Steps for You

1. Calculate how much of your Solo 401k voluntary after-tax contribution was excess.

2. Contact your Roth IRA custodian to request a return of excess contribution plus earnings.

3. Work with your CPA to file or amend tax returns (Form 1040, 1099-R, 5329 if excise tax applies).

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