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Frequently Asked Questions

What happens if you make an excess contribution to an IRA?

For tax years after an excess contribution is made to a traditional IRA, a taxpayer may be able to distribute the excess contribution and avoid further impositions of the excise tax if total contributions during the year of the excess contribution did not exceed the statutory dollar limit on regular contributions.

What happens if I violate the IRA contribution rules?

If you violate one of the rules, you’ve made an ineligible, or excess, contribution. You’ll owe a 6% penalty on the amount each year until you fix the mistake. 2 Additionally, you will not be allowed to deduct excess contributions from your income, as you would normally be allowed to do with traditional IRA contributions.

Can I make an improper rollover contribution to an IRA?

Make an improper rollover contribution to an IRA. Excess contributions are taxed at 6% per year for each year the excess amounts remain in the IRA. The tax can't be more than 6% of the combined value of all your IRAs as of the end of the tax year.

Can I re-characterize a contribution to a traditional IRA?

The IRS says that you can apply the excess contribution in one year to a later year as long as the total contributions for that later year are less than the contribution limit for the year. 3  Moving the money over to a traditional IRA is referred to as "re-characterizing" a contribution.

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