Fixing Excess IRA Contributions After the October 15 Deadline

Now that the October 15 deadline for fixing excess IRA contributions has passed, taxpayers who have missed the deadline may be wondering whether they still have options. The excess contribution can still be withdrawn from the IRA, but the client will have to pay a six percent penalty, which is paid by filing IRS Form 5329. It's important to withdraw the excess amount because the six percent penalty will continue to accrue until the excess contribution has been withdrawn, for up to six years under the statute of limitations that now applies post-SECURE Act 2.0. Taxpayers can also elect to allow the excess to remain in the IRA and apply the excess amount to contributions in future years. The six percent penalty still must be paid until the entire excess contribution can be correctly applied to cover contributions in a future year for which the taxpayer qualifies to make the contribution. For more information on the penalty for excess IRA contributions, visit Tax Facts Online. Read More: Link to Q3669.