@ndy856 wrote:
Ok great. This 10% penalty hurts way less than the 6% penalty because it's 6% of Excess Contribution (Principal basis not the gains) and per year. So if it takes the IRS to find out 5 years later about it, then it's 6% of that x5.
Glad I caught it & take corrective action.
Actually some people prefer the 6% penalty each year on the excess amount if it is earning 12% interest. When they finally remove it with a regular distribution, since the 6% penalty was paid, the interest (earnings) stay in the account and do not need to be removed - only the original contribution amount must be removed to end the annual 6% penalty.
**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.**
