If I made an excess contribution to a Traditional IRA of $6,000 for 2023, how do I calculate the earnings? The account is a non-investment account earning 2% APR.

[TaxQuestions60]

Th funds were in the account a total of 12 days.

[JulieS]

No, you shouldn't have to calculate that yourself. When you call the company that holds your IRA, tell them you need to withdraw the excess contribution and earnings and they will tell you how much the earnings are. 

[TaxQuestions60]

Sorry Julie - I see your answer now.  That is the problem, I have this account with my local credit union.  It is monitored through a third party company.  The CU has no idea what I'm even talking about. 

[BillM223]

So the third party actually has the account or what? When you are to withdraw the funds, somebody - either the CU or the third party - has to know what they're doing.

If not, you can take a swing at estimating the earnings (since they will be so small).

1. 2% APR is .0055% per day (assuming 365 days a year) - 2% divided by 365

2. $6,000 times .000055  (.0055% is .000055) is equal to 0.33 per day

2. Earnings for 12 days is $3.96 (.33 per day times 12 days).

Since the account is earning 2% APR, this is more or less correct - if would be different if it were an investment account.

[fanfare]

did you take action already?

such as removing $6,000 ?

The custodian has forms for this and the CU should be able to provide the required form or tell you where to obtain it.

The form is "removal of excess plus earnings".

@TaxQuestions60 

[TaxQuestions60]

Thank you. Sorry for the delay in responding - I needed to stop thinking about this for a few days! I went to the CU and withdrew the funds.  We called Acensus (the 3rd party) and they walked us through the process.  Hopefully everything is correct.  Worst case I have to file an amended return next year. 

[TaxQuestions60]

Thank you!  I did this calculation and got the same result before I asked, but I was under the impression there is a special formula the IRS uses and didn't want to get it wrong. I'll just use the $3.96 and hope for the best! If I use the IRS calculation the results are zero earnings, but I'd rather over report than under!