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Level 2
posted Jun 4, 2019 3:52:04 PM

Can Roth IRA Over contribution in 2016 be corrected in early 2018 before filing date?

I contributed too much to my Roth in 2016.  I paid the 6% penalty on my 2016 tax return.  If I remove the excess contribution in January 2018 before filing my tax return will I still need to pay the penalty on my 2017 return?  Have I missed the opportunity to avoid the penalty by not removing the money in 2017?  I cannot contribute anything to IRA in 2017 or 2018 because of no earned income.  Thanks!

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1 Best answer
Level 15
Jun 4, 2019 3:52:05 PM

Since you did not resolve the excess before the end of 2017, you are subject to another 6% penalty for 2017.  Removing the excess in January 2018 will avoid another 6% penalty for 2018.

2 Replies
Level 15
Jun 4, 2019 3:52:05 PM

Since you did not resolve the excess before the end of 2017, you are subject to another 6% penalty for 2017.  Removing the excess in January 2018 will avoid another 6% penalty for 2018.

Level 15
Jun 4, 2019 3:52:07 PM

To remove the excess for 2018 you must make a regular distribution of the amount of the excess with no adjustment for gains or losses while in the account.  The distribution will be a nontaxable distribution of contribution basis.