@Drfreud wrote:
Thanks for that answer. Two small clarifying questions. If I remove the excess and the earnings on that excess prior to April 15, 2021, would I owe a 10% penalty on the earnings or only the normal tax rate for my income level? If over a year since the investment, would that be considered a long-term capital gain or a short-term capital gain.
Removing your own contribution is not taxable only the earnings are added to your income and subject to a 10% penalty on the earnings only.
If not removed by April 15 (or Oct 15 if you file on time or file and extension) then the earning stay in the account but the excess contribution is subject to a 6% penalty that repeats each year until removed.
If you would rather pay the 6% on the excess and leave the earnings in the account then remove the excess as a regular distribution (not a "return of contribution") after Oct 15, but before Dec. 31.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
