What is earnings on excess contributions

Forum|Forum|7 years ago
June 3, 2019
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Vanessa11_2

Level 13

If you made contributions to an IRA greater than the amount allowed for a tax year (more than $5,500 or $6,500 if 50 or older or more than your taxable compensation for the year) you could face a penalty for the extra amount contributed.

Any money earned on this excess contributions would be considered earnings on excess contributions.

Example, you contributed $7,500 to your IRA mistakenly and you are 40 years old. The Excess contribution would be $2,000. If that $7,500 increased in value (had investment earnings) to say $10,000 the amount that the $2,000 contributed to that increase in value would be the earnings on excess contributions.

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