Reply To: Excess Roth Contribution

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Alan S.

Gain or loss on an excess contribution is a major factor in deciding how to deal with an excess contribution. With a large enough gain, there is an advantage to not have the excess returned with earnings by the extended due date. Compare the 6% excise tax to the ordinary tax on the earnings and possibly penalty to determine what is less. Then either apply the excess to the next year’s contribution or distribute it before year end to avoid a second year of excise taxes.