Roth IRA excess contribution

[Kdebner]

In reviewing my past Roth contributions, I recently noticed that in 2017 and 2019 I over contributed by $2K each year.  What are my options for these extra funds and will I be penalized for the gains or just the 6% of the excess annually? What do I need to submit in my taxes this year to show the correction? I am over the income limit to contribute in 2024. Thank you.

[marctu]

An excess IRA contribution occurs when you contribute more to your Traditional or Roth IRA in a given year than the IRS allows.  If you do not remove the excess within six months of of the original due date of the return you pay a 6% excise tax per year until the excess contributions are removed.

So since the excess contributions are for tax year 2017 and 2019, you have paid the 6% excise tax each year the excess remains.  Since this is an untimely correction, the IRS does not require an earnings calculation, so you will not need to remove the earnings  

You will receive a 1099-R for 2024 that will be reported to the IRS, that will reflect the removal of the excess contributions for 2017 and 2019.  So get the money out ASAP.

Thanks again for the question @Kdebner  

All the best,

Marc 

Employee Tax Expert

[Kdebner]

Has the 6% already been taken out each year, or does it accrue and be taken out once I remove the excess from the account?  ie. will I be hit with the penalty all at once? @marctu 

[marctu]

So you would have paid the penalty for the 2017 excess contribution in 2017-2023 and the penalty for the 2019 excess contribution in 2019-2023.   It should be reflected on Form 5329 for tax years 2017-2023 @Kdebner