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Level 1

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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Level 20

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

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 20

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

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 20

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

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.