I discovered this week that for my wife's traditional IRA @ Vanguard , I made an excess 5500$ contribution for the year 2018. (non-deductible)
Since 2017, due to income limits and work 401ks, all of our IRA contributions were non-deductible.
I spoke with Vanguard .
They confirmed that I do not have to remove the earnings on the excess contribution.
They confirmed that 6% penalty applies on the contribution each year for 2018/2019/2020.
The confusing part is : They also say that the contribution (5550$) will need to be included in my regular income, when its removed and will be taxed at my tax rate plus an 10% early withdrawal penalty. This was a nondeductible contribution which has already been taxed. So, not sure if it should be taxed again and if an early withdrawal penalty should apply as I am just correcting an excess contribution.
