If you put too much money into a Roth IRA, the IRS charges a 6% excise tax on the excess for every year it stays in the account. Excess Roth IRA contributions can usually be fixed without any penalty, though, as long as you act before your tax filing deadline, including extensions. After that, the 6% tax applies for the year of the excess and keeps recurring until you clear it out or absorb it into a later year’s limit.
How Contributions Go Over the Limit
For 2026, the annual IRA contribution cap is $7,500 if you’re under 50 and $8,600 if you’re 50 or older, and it applies across all your IRAs combined. Put $3,000 in a Traditional IRA and you have $4,500 of room left in a Roth. Your contribution is also capped at your taxable compensation for the year: earn $5,000 and you can contribute no more than $5,000, whatever the general limit says.1Internal Revenue Service. Retirement Topics – IRA Contribution Limits
Income matters too. The IRS uses your Modified Adjusted Gross Income to decide whether you can contribute in full, in part, or not at all. For 2026:
- Single or head of household: full contribution below $153,000 MAGI, reduced between $153,000 and $168,000, none at $168,000 and above.
- Married filing jointly: full contribution below $242,000, reduced between $242,000 and $252,000, none at $252,000 and above.
- Married filing separately and lived with your spouse at any point during the year: reduced between $0 and $10,000, none at $10,000 and above.
These thresholds adjust for inflation each year.2Internal Revenue Service. IRS Notice 2025-67 – 2026 Amounts Relating to Retirement Plans and IRAs If you and your spouse did not live together at any point during the year, the IRS treats you as single for this purpose.3Office of the Law Revision Counsel. 26 USC 408A – Roth IRAs
Most excesses come from one of a few situations. A year-end bonus, exercised options, or unexpected capital gains push MAGI above the phase-out ceiling after you’ve already funded the account. Contributions to both a Traditional and a Roth IRA drift over the combined cap because no one is tracking the total.1Internal Revenue Service. Retirement Topics – IRA Contribution Limits Or a working spouse funds a Roth for a non-working spouse without checking that combined contributions stay within the compensation reported on the joint return.
What the 6% Excise Tax Actually Costs
The penalty is 6% of the excess amount, assessed at the close of each tax year the surplus is still in the account. A $2,000 over-contribution costs $120 a year. The tax cannot exceed 6% of the account’s total value, but that ceiling rarely matters because the excess is almost always smaller than the balance.4Office of the Law Revision Counsel. 26 USC 4973 – Tax on Excess Contributions to Certain Tax-Favored Accounts and Annuities
The trap is that the penalty repeats. An excess left alone in 2026 generates a 6% charge in 2027, again in 2028, and every year after until you fix it. You report and pay the tax on IRS Form 5329.5Internal Revenue Service. Instructions for Form 5329
Fixing the Excess Before Your Filing Deadline
Catch the mistake before April 15, or October 15 if you file for an extension, and you have two clean options that avoid the 6% penalty entirely.
Withdraw the Excess and Its Earnings
Contact your IRA custodian and ask for a “return of excess contribution.” The custodian pulls the excess amount along with any earnings it generated while sitting in the account. The IRS calls those earnings the Net Income Attributable to the contribution, and there’s a specific worksheet in Publication 590-A that calculates it.6Internal Revenue Service. Publication 590-A – Contributions to Individual Retirement Arrangements If the account lost money over the relevant period, the NIA can be negative, and you withdraw less than you originally put in.
Done before the deadline, the returned contribution is treated as though it was never made, and you don’t report the contribution on your return.7Internal Revenue Service. IRA Year-End Reminders The earnings portion is handled separately, covered below.
Recharacterize to a Traditional IRA
Recharacterization moves the contribution and its NIA from your Roth IRA into a Traditional IRA, and the IRS then treats the money as a Traditional IRA contribution from the start.3Office of the Law Revision Counsel. 26 USC 408A – Roth IRAs Notify your custodian and complete the transfer before the filing deadline including extensions. Whether the recharacterized amount is deductible depends on Traditional IRA rules that apply to your situation; a nondeductible contribution creates its own basis-tracking requirements.
One boundary worth naming: recharacterization is available for contributions but not for Roth conversions. If the problem is a conversion rather than a contribution, this path is closed to you.
Tax on the Earnings You Pull Out
When you withdraw excess contributions before the deadline, the earnings that come out with them are taxable as ordinary income. The timing detail that trips people up: the earnings are taxable in the year the contribution was made, not the year of the withdrawal. Contribute an excess in 2026 and withdraw it in early 2027 before the deadline, and the earnings go on your 2026 return.8Internal Revenue Service. Excess Contributions to Roth IRAs
The SECURE 2.0 Act of 2022 eliminated the 10% early distribution penalty on earnings withdrawn as part of a timely corrective distribution, even for taxpayers under 59½. Only the income tax on the earnings applies now.
The returned excess itself is not taxable because it was already after-tax money. Your custodian issues a Form 1099-R reporting the distribution, which you’ll need when you file.
Fixing It After the Deadline
If the deadline has passed, the penalty-free window is closed. You owe the 6% tax for the year the excess was contributed, and for every year since if you missed it in prior years too. What you can still do is stop the penalty from continuing.4Office of the Law Revision Counsel. 26 USC 4973 – Tax on Excess Contributions to Certain Tax-Favored Accounts and Annuities
Two ways to end the recurrence:
- Withdraw the excess. Unlike a timely correction, the IRS does not require an NIA calculation for a late withdrawal. You pull the excess amount. If the excess occurred because you exceeded the contribution cap, the withdrawn amount may be taxable in the year of withdrawal; if it occurred because your income was too high, the withdrawal up to the annual limit is generally not taxable.
- Carry it forward. Leave the excess in the account and apply it against a future year’s contribution limit by reducing next year’s contribution by the excess amount. The 6% penalty still applies for the year the excess existed, but it stops once absorbed. This works if you expect to be eligible for a full contribution next year.
Either way, file Form 5329 for each year the excess sat in the account, and pay the 6% tax owed.5Internal Revenue Service. Instructions for Form 5329
Forms You’ll Need
Which forms apply depends on how you correct the problem.
- Form 5329 is required whenever you owe the 6% excise tax. If you fixed the excess before the deadline and no penalty is due, you don’t file it for that year.5Internal Revenue Service. Instructions for Form 5329
- Form 8606 is used for recharacterizations. If you recharacterized only part of a contribution, report the remaining nondeductible Traditional IRA portion on Part I. If you recharacterized the entire contribution, no Form 8606 is required for it. If your excess was simply returned to you rather than recharacterized, don’t report the contribution or the distribution on Form 8606 at all.9Internal Revenue Service. Instructions for Form 8606
- Form 1099-R comes from your custodian and documents the distribution. You don’t file it yourself, but the figures on it belong on your return.
Keep your account statements showing the deposit date and amount, balances before and after the contribution for the NIA calculation, and any distribution confirmations. Those records matter if the IRS questions the correction later.
Why You Should File Form 5329 Even Late
Skipping Form 5329 does not make the penalty go away. The three-year statute of limitations for the IRS to assess the excise tax doesn’t start until Form 5329 is actually filed. Never file, and the IRS can pursue the penalty indefinitely.10Internal Revenue Service. Statute of Limitations Processes and Procedures Filing the form, even late, at least starts the clock.
If you find an excess from years back, file Form 5329 for each affected year with the 6% payment, then either withdraw the excess or absorb it into the current year’s limit so the penalty stops accruing.