Excess Contributions to Roth IRAs

How to handle contributions or conversions that are too large or not permitted.

If you make a contribution or conversion to a Roth IRA that’s not permitted, or in a larger amount than permitted, you’ve made an excess contribution. The law provides ways to fix erroneous contributions, and erroneous conversions, too.

Excess contributions

Go Roth! Your Guide to the Roth IRA and Other Roth Accounts

There are various ways you could find yourself with an excess contribution to a Roth IRA:

  • The total amount of your regular contributions to one or more Roth IRAs and traditional IRAs for one year exceed the maximum allowed for that year. Often this happens with simple forgetfulness: people make the maximum contribution early in the year, and then make another contribution for the same year.
  • Your total regular contributions to IRAs exceed your taxable compensation income for the year. This can happen when your income is lower than expected, or when you mistakenly rely on nontaxable income, such as income covered by the foreign earned income exclusion.
  • Your permitted Roth IRA contribution was reduced or eliminated because of the size of your modified adjusted gross income. Note that income limitations still exist for regular contributions even though they’ve been eliminated for conversions.
  • You made an improper conversion. For years before 2010 the most frequent cause of failed conversions was the $100,000 income limitation. This limitation on conversions has been repealed, but you can still have a problem if you inadvertently transfer money to a Roth that isn’t eligible for a conversion. A common stumbling block is making a conversion before taking a required minimum distribution.

Excess contribution penalty tax

Whatever the reason may be, a penalty tax will apply if you don’t take action to correct an excess contribution. This is a 6% tax you’re required to pay each year the excess contribution remains uncorrected. For example, suppose you made a $5,500 contribution to a Roth IRA early in 2021, then got a larger bonus than you expected and found that due to the income limitation your permitted contribution was only $4,300. Your excess contribution was $1,200. If you don’t correct the excess contribution for 2021, you’ll have to pay $72 excess contribution tax (6% of $1,200). And if the problem remains uncorrected beyond the end of 2022, you owe another $72. You’ll continue to owe this tax each year until you correct the excess contribution.

This tax can easily be 100%, or even more than 100%, of the amount of investment income generated by this excess amount in a year. It’s important to correct an excess contribution.

Corrective action

There are four ways to correct an excess contribution to a Roth IRA. Two of them can be used to completely avoid the excess contribution penalty, and the other two prevent it from applying to later years after it has applied to one or more years. Depending on your situation, you may find that one or more of these correction methods are unavailable.

Withdrawing excess by due date of return

If you find that your contribution to a Roth IRA was improper or too large, you can avoid the 6% penalty tax by taking the money out. Relief from the penalty is available only if the following are true:

  • You receive a distribution from the IRA on or before the due date (including extensions) for filing your return for the year of the contribution.
  • The distribution includes the amount of the excess contribution and the amount of net income attributable to the excess.

When you choose this method of correction, you’re required to report and pay tax on the net income attributable to the excess in the year of the contribution, even if you take it out during the following year, before the return due date. The earnings will be taxed like any other taxable distribution of earnings from a Roth IRA, and will be subject to the early distribution penalty if you’re under 59½ unless an exception applies.


Another way to correct an excess contribution is to have the trustee of your Roth IRA make a direct transfer from the Roth IRA to a traditional IRA. To avoid penalties, you must meet requirements similar to those described in the previous section:

  • The transfer must occur on or before the due date (including extensions) for filing your return for the year of the contribution.
  • The transfer must include the amount of the excess contribution and the amount of net income attributable to the contribution.

If you meet these requirements, you’ll be treated as if the contribution went to the traditional IRA in the first place. That means you don’t have to pay tax on the earnings that are transferred from one IRA to another. The IRS calls this a recharacterization.

Example: Suppose you contribute $5,500 to a Roth IRA early in 2021, expecting your modified AGI to be below the income limitation for Roth IRA contributions. At the end of the year you find that your modified AGI is higher than expected and your Roth IRA contribution limit is $3,500. Before October 15, 2022 you have the trustee of your Roth IRA transfer $2,000 plus the earnings attributable to that $2,000 directly to a traditional IRA. You’re treated as if you originally contributed $3,500 to the Roth IRA and $2,000 to the traditional IRA.

A recharacterization transfer provides a bonus. Besides eliminating the 6% penalty tax, it allows you to keep the earnings you may have built up during the year in an IRA, instead of taking the earnings out and paying tax on them. But you’ll benefit from a recharacterization only if you’re permitted to contribute to a regular IRA. If your excess contribution to the Roth IRA would also be an excess contribution in a regular IRA you can’t use this method to avoid a penalty. For example, if you waited more than 60 days to complete a rollover, or didn’t have enough earned income to support your contribution, you won’t be able to fix the problem by making a recharacterization.

Later withdrawal

If you fail to take a corrective distribution within the time period described above, you’ll incur the excess contribution penalty for the year of the contribution and incur it again for each subsequent year it remains uncorrected. You can prevent it from applying to a subsequent year by withdrawing the excess from your Roth IRA, but the rules here are different than for the type of correction described earlier:

  • You need to act by the end of the year, not by the due date of the return for that year. If your excess contribution was made in 2021, and missed the deadline to avoid a penalty for 2021, you must act by December 31, 2022 to avoid incurring a second penalty for 2022. Note that this is only 2½ months after the deadline for correcting the original year, as described earlier.
  • When using this correction method you don’t have to withdraw earnings. You simply withdraw the amount of the excess contribution.

Contribute less than maximum

The last way to correct an excess contribution is to contribute less than the maximum in a subsequent year. For example, if you have a $2,000 excess contribution in 2024 and you contribute at least $2,000 less than the maximum you’re allowed to contribute in 2025, you’ll incur the excess contribution penalty for 2024 but not for 2025 or later years. The nice thing about this particular method of correction is that it sometimes happens purely by accident: people sometimes discover an excess contribution from a few years earlier and find that it was automatically corrected in a subsequent year when they contributed less than the maximum.

Scroll to Top