How do I correct an excess IRA contribution?
Usually, the best option to correct an excess contribution is to remove the contribution and the earnings from the account by the filing deadline (including extensions) of the return. Your IRA custodian should be able to tell you how much money you have earned from the excess contribution. If not, you'll need to calculate it yourself.
Penalty Information:
Generally, any contributions withdrawn after the due date (or extended due date) will be considered taxable distributions and will be reported to you on a 1099-R. If you haven't reached age 59 1/2, the 10% additional tax on early distributions may apply.
If the excess contribution is not withdrawn in time, you may be able to apply the excess amount to your IRA contribution for 2026 to avoid some penalties. In this situation, the only penalty would be the 6% penalty on the excess contribution. If you do this, remember this contribution will contribute to your maximum contribution limit for 2026. Keep in mind that if there is some reason you're ineligible to contribute for 2026 (such as your income being over the limit to contribute), you'll be forced to pay the tax on the excess contribution again or you'll need to withdraw the excess contribution and earnings.
Penalty Information:
Generally, any contributions withdrawn after the due date (or extended due date) will be considered taxable distributions and will be reported to you on a 1099-R. If you haven't reached age 59 1/2, the 10% additional tax on early distributions may apply.
If the excess contribution is not withdrawn in time, you may be able to apply the excess amount to your IRA contribution for 2026 to avoid some penalties. In this situation, the only penalty would be the 6% penalty on the excess contribution. If you do this, remember this contribution will contribute to your maximum contribution limit for 2026. Keep in mind that if there is some reason you're ineligible to contribute for 2026 (such as your income being over the limit to contribute), you'll be forced to pay the tax on the excess contribution again or you'll need to withdraw the excess contribution and earnings.
