Excess Roth IRA contribution: the 6% penalty and how to fix it

What counts as an excess Roth contribution

Under §4973(f), a Roth excess is the amount you contributed for the year, not counting qualified rollovers and conversions, over the amount §408A(c) allowed. Excess from earlier years that you never fixed carries forward too. In practice, high-income households run into it in a handful of predictable ways.

The dollar limit is per person, across all your IRAs; see can you have multiple Roth IRAs. The 2026 figures come from IRS Notice 2025-67: a $7,500 limit, a $1,100 catch-up at 50 or older, and Roth phase-out ranges of $153,000–$168,000 for single and head-of-household filers and $242,000–$252,000 for joint filers. The RMD trap is explained in does a Roth conversion count as an RMD.

Inside the phase-out band your limit is reduced, not eliminated. Worksheet 2-2 in Publication 590-A divides the amount of modified AGI above the threshold by the width of the band ($15,000 single, $10,000 joint), rounds the ratio to at least three decimal places, multiplies it by your maximum contribution, subtracts the result from that maximum, and then rounds up to the next $10, with a $200 floor for anyone still inside the band. Two 2026 examples for a single filer under 50:

• Modified AGI $160,500: ($160,500 − $153,000) ÷ $15,000 = 0.500; 0.500 × $7,500 = $3,750; limit $7,500 − $3,750 = $3,750. A full $7,500 contribution leaves a $3,750 excess.
• Modified AGI $163,217: $10,217 ÷ $15,000 = 0.681; 0.681 × $7,500 = $5,107.50; $7,500 − $5,107.50 = $2,392.50, rounded up to $2,400. A full contribution leaves a $5,100 excess.

Any traditional IRA contribution you made for the same year reduces the Roth figure further, because the two share one limit.

How the 6% excise tax works

Section 4973(a) charges a tax equal to 6% of the excess contributions, measured at the close of the taxable year. Three mechanics matter more than the rate.

• It is a year-end snapshot. The test runs on December 31. An excess that is out of the account by then, or treated as never contributed because it was fixed by the deadline, does not trigger the tax for that year.
• It repeats. Under §4973(f)(2), last year's uncorrected excess becomes part of this year's excess unless distributions or unused contribution room reduce it. The same $7,500 is taxed again each December.
• It is capped at the account value. The statute limits the tax to 6% of the value of the account at year-end. A small excess in a large account pays the full 6%; the cap only matters if the account itself has shrunk below the excess.

The tax applies to the excess amount, not the earnings on it: a $7,500 excess that has grown to $9,000 still costs $450 a year. It is a flat charge rather than a compounding one, which is exactly why it is expensive: it never stops on its own.

Each year's tax is due with that year's return. If a Form 5329 that was due was never filed, interest and failure-to-file and failure-to-pay additions can be layered on top of the figures above.

The four ways to fix it

Which fix is available depends on one question: has the filing deadline for the contribution year passed?

Sources: IRC §4973, IRC §408(d)(4), IRS Publication 590-A, and the Instructions for Form 5329.

How to withdraw an excess Roth IRA contribution before the deadline

This is the "return of excess" or "removal of excess" that every custodian offers as a form. Under §408(d)(4), as the Form 5329 instructions restate it, the excess is treated as never contributed if two conditions are met:

• You withdraw it by the due date, including extensions, of your return for the contribution year; and
• You also withdraw the net income attributable to it (the earnings or loss while it sat in the account) and include those earnings in income.

The process, in order:

1. Confirm the excess amount and the tax year the contribution was for; a deposit made in February 2027 can be a 2026 contribution.
2. Submit the custodian's return-of-excess form, naming the amount, the contribution year and the account. Do not take an ordinary distribution; the Form 1099-R will be coded wrong.
3. Let the custodian compute the net income attributable (worked below) and distribute the excess plus or minus that figure. Ask for the calculation in writing.
4. Report the earnings on the return for the contribution year, attach a statement explaining the withdrawal, and if you have already filed, amend.

Tax on the earnings. The returned contribution is tax-free. The earnings are ordinary income for the year the contribution was for, not the year you withdraw them. The Form 8606 instructions say so directly: a contribution for 2025 returned in 2026 is reported on the 2025 return, original or amended, on Form 1040 line 4a (gross) and 4b (earnings).

No 10% on the earnings. Section 333 of SECURE 2.0 removed the 10% early-distribution tax from corrective distributions made by the deadline, for distributions on or after December 29, 2022. The Form 5329 instructions carry it as exception 21: if you were under 59½ when the money came out, you list the earnings on line 1 of Form 5329 and back them out on line 2 with exception number 21. The result is a form with nothing owed, but the form is still expected.

Net income attributable: the formula and a worked example

The custodian calculates the earnings, but you sign the return, so it is worth checking. Treasury Regulation §1.408-11 sets the method, reproduced as Worksheet 1-4 in Publication 590-A:

Two features surprise people. The calculation runs on the whole account, not the fund you bought with the contribution, so an account-wide gain drags the figure up even if your specific purchase fell. And it can be negative: in a down market you withdraw less than you contributed, and that is correct, not an error. If you own several Roth IRAs, the calculation is done only on the account that holds the contribution, and that account must make the distribution.

Had the account fallen to $95,520 instead, the ratio would be −0.040, the NIA −$300, and only $7,200 would come out, with nothing taxable. The same formula governs a recharacterization; the difference is where the money lands. The recharacterization version is worked in recharacterizing a Roth contribution.

Recharacterize to a traditional IRA

A recharacterization moves the contribution and its net income attributable from the Roth to a traditional IRA in a trustee-to-trustee transfer. The contribution is then treated as if it had been made to the traditional IRA on the original date. The deadline is the same as a withdrawal. Nothing is taxable. Because traditional IRAs have no income limit for contributing, an excess caused by income becomes a valid contribution, usually non-deductible for someone covered by a workplace plan.

For the reader this site is written for, that is usually the better fix when income is the cause: the money stays inside the IRA system, and the non-deductible contribution can then be converted to Roth, completing a backdoor Roth. The cost depends on the pro-rata rule. If you hold large pre-tax traditional, SEP or SIMPLE balances on December 31 of the conversion year, most of the conversion will be taxable, and a plain withdrawal may be cleaner. The mechanics and reporting are covered in recharacterizing a Roth contribution.

One boundary: you can only recharacterize regular contributions. A conversion cannot be undone for tax years beginning after 2017, and neither can a rollover from an employer plan into a Roth IRA. An excess created by converting an RMD amount has to be withdrawn.

Withdraw the excess after the deadline

Once the deadline has passed, the excess is no longer "treated as never contributed," and the 6% for the contribution year is owed. What you can still control is every year after that. Section 4973(f)(2)(A) reduces the carried-forward excess by "the distributions out of the accounts for the taxable year," so pulling the excess amount out before December 31 zeroes it for the current year.

Two features make this cheaper than it sounds for a Roth:

• You withdraw only the excess, not the earnings. Section 408(d)(4) and its earnings requirement no longer apply; the earnings stay in the Roth and keep compounding tax-free.
• The withdrawal is normally tax-free and penalty-free. Under the Roth ordering rules in §408A(d)(4), any distribution is treated as coming first from regular contributions, then conversions, then earnings. A distribution no larger than your total regular contributions is a return of basis, so nothing is included in income and the 10% tax, which attaches only to amounts included in income or to recent conversion dollars, does not apply at any age. The ordering rules are explained in Roth IRA early withdrawal penalty.

Custodian forms differ; some call this "removal of excess after the deadline." Give them the original contribution year and confirm that no earnings calculation is wanted. The distribution is reported on Form 8606 Part III, and the amount then flows to Form 5329 line 20 to reduce the carried-forward excess.

How to apply an excess Roth IRA contribution to next year

Under §4973(f)(2)(B), the carried-forward excess is also reduced by the excess of the Roth maximum allowable for the year under §408A(c)(2) and (c)(3) over the amount you contributed to all IRAs for that year. In plain terms: unused Roth room in a later year absorbs the old excess. If you were allowed to contribute $7,500 in 2027 and you contribute nothing to any IRA, up to $7,500 of an old excess is reclassified as your 2027 contribution, and the 6% stops. There is no form to elect this; it happens on Form 5329 line 19, where you enter the unused room.

Three conditions make or break it:

• The room is the Roth limit after the income phase-out. If your 2027 modified AGI is still above the cut-off, your allowable Roth contribution is zero, nothing absorbs the excess, and the tax keeps running.
• Any IRA contribution for that year uses up the room, traditional or Roth. A $7,500 non-deductible traditional contribution for a backdoor Roth leaves nothing to absorb the excess.
• It does not undo past years. You owe 6% for each year-end the excess sat in the account before it was absorbed, and a Form 5329 for each of those years.

Absorption suits a one-off income spike followed by a return to normal income, or a dollar-limit mistake by someone well inside the limit. For a high earner whose income will stay above the phase-out, it does not work at all; withdraw the excess instead.

Deadlines as of October 2026

As this is written, the deadline for 2025 contributions has passed and the deadline for 2026 contributions has not. The dates below assume a calendar-year individual return.

The October date applies even if you never filed an extension. If you filed your return on time, Treasury Regulation §301.9100-2 gives an automatic six months from the original due date. You make the withdrawal within that window, then file an amended return marked "Filed pursuant to section 301.9100-2" that reports the earnings and explains the withdrawal (Form 5329 instructions, Part IV). Leave margin; October queues at custodians are long.

Here is what a missed deadline costs. Take a $7,000 excess for 2025, discovered this month, in an account worth more than $7,000:

Reporting: 1099-R codes, Form 5329 Part IV, Form 8606

Form 1099-R. The custodian reports the correction in the year the money moves. Per the Instructions for Forms 1099-R and 5498, a return of excess from a Roth IRA shows the gross distribution in box 1, only the earnings in box 2a, and code J combined with 8 or P in box 7. Code 8 means the earnings are taxable in the year of the form; code P means the prior year. A 2026 contribution removed in March 2027 should arrive on a 2027 form coded PJ and be reported on the 2026 return. The form arrives the January after the distribution, often after you have filed, so report from the custodian's confirmation and attach a statement. If a correction is coded 8 where you expected P, the Form 8606 instructions, not the code, decide which year's return reports the earnings.

Both families of codes are explained in the 1099-R code guide.

Form 5329, Part IV. If you owe the 6% for any year, it goes in Part IV of Form 5329, filed with your Form 1040, or by itself if you have no return to file. On the 2025 form, per the instructions: line 18 carries in the prior year's excess (line 24 of the prior form); line 19 is your unused Roth room for this year, the absorption described above; line 20 is distributions from your Roth IRAs, taken from Form 8606 line 19 plus any qualified distributions; line 23 is the current year's excess not withdrawn in time; line 24 is the total excess at year-end; and line 25 is the 6% tax, which also goes on Schedule 2. A late Form 5329 for a prior year uses that year's version of the form and can be filed by itself if nothing else on the return changes.

Form 8606. A correction made by the deadline is not reported on Form 8606; the earnings go on Form 1040 line 4b with a statement. A withdrawal after the deadline is a non-qualified Roth distribution reported in Part III, where your basis in regular contributions makes it tax-free, and the Part III total feeds Form 5329 line 20. After a recharacterization, the resulting non-deductible traditional IRA contribution goes in Part I.

Statute of limitations. Before SECURE 2.0, an unfiled Form 5329 meant the assessment period for the excise tax never started. Section 313 of SECURE 2.0 amended §6501(l)(4): your income tax return for the year now starts the clock, and when that return is the trigger the period for the §4973 tax is six years rather than three. That limits exposure for old excesses, but each year the excess remains still creates a new year of tax, with its own clock.

Which fix when: decision table and rules

1. Confirm it is an excess. Recompute modified AGI after pre-tax deferrals, HSA contributions and other above-the-line deductions, and check compensation, before moving any money.
2. Use the custodian's correction form, not an ordinary distribution, so the 1099-R is coded correctly.
3. After the deadline, accept the 6% for the missed year, file Form 5329, and remove the excess before December 31 unless you will clearly have unused Roth room next year to absorb it.
4. Avoid a repeat: when income is volatile, contribute after year-end (up to the April deadline) once modified AGI is known, or go straight to the backdoor route when income is anywhere near the band.

For the broader Roth framework, including when contributions, conversions and backdoors each fit, start at the Roth conversion guide or the Learn hub. To see how a conversion would change your lifetime tax picture, use the calculators.

This article is general education about federal tax rules as of October 2026. It is not tax, legal or investment advice. Facts such as your filing status, prior-year carryovers, other IRA balances and state tax rules change the answer. Confirm the correction with your custodian and a qualified tax professional before acting.