Net Income Attributable (NIA) for Excess IRA Contributions

Net income attributable, or NIA, is the earnings or losses your excess IRA contribution generated while it was sitting in the account, and the IRS requires you to remove it along with the excess itself. The calculation isn’t optional or estimated. Treasury Regulation 1.408-11 gives you one formula, and your custodian, your tax return, and any future audit will all rely on the same number.¹

Why You Have to Calculate It

When you put more into an IRA than the annual limit allows, the fix is to pull the excess back out before the deadline. But the excess didn’t sit idle. It participated in whatever the account did. If your investments went up, part of that gain belongs to money that was never supposed to be there, and the IRS wants it out too. If they went down, the amount you remove is smaller than the excess you put in.

Getting the number right matters for two reasons. It determines how much taxable income you report on the earnings, and it determines whether your correction actually counts. An incomplete corrective distribution leaves excess in the account and exposes you to a 6% excise tax for every year it stays there.²

The Formula

NIA = Excess Contribution × (Adjusted Closing Balance − Adjusted Opening Balance) ÷ Adjusted Opening Balance

Three inputs feed it:

The excess contribution is the dollar amount you need to remove.
The adjusted opening balance (AOB) is the fair market value of your IRA immediately before the excess contribution was deposited, plus any other contributions, transfers, or rollovers that entered the account during the computation period.
The adjusted closing balance (ACB) is the fair market value of your IRA immediately before the corrective distribution is processed, plus any distributions or transfers that left the account during that same period.

The computation period runs from immediately before the excess contribution was made through immediately before you remove it.¹ If you made several excess contributions, the period starts immediately before the earliest one.

A Worked Example

You contributed $2,000 more than allowed on June 1. Your IRA was worth $40,000 right before that deposit, and no other contributions came in during the period. By the time you request the corrective distribution the following February, the account is worth $45,000 and no money left in the meantime.

AOB = $40,000 + $2,000 = $42,000. The excess contribution itself is part of the opening balance because it was in the account at the start of the measurement window. ACB = $45,000.

NIA = $2,000 × ($45,000 − $42,000) ÷ $42,000 = $2,000 × 0.07143 = $142.86.

You withdraw $2,142.86: the $2,000 excess plus $142.86 in earnings.

When the Result Is Negative

If the account lost value during the computation period, the formula produces a negative number, and the total you remove is less than the original excess. Using the same setup but with the account falling to $39,000, the math gives you a negative NIA and a corrective distribution smaller than $2,000. You don’t get to claim a deduction for the loss, but you also aren’t required to remove money the excess never actually earned.

Details That Change the Number

The calculation covers the entire IRA, not the specific investment you put the excess into. If your account holds a stock fund and a bond fund and the excess went into bonds, the NIA still reflects the whole account’s performance.¹

The adjusted opening balance has to include every contribution, transfer, and rollover that entered the account during the computation period, not just the excess. Missing a rollover from an old 401(k) or an employer SEP contribution that arrived during that window will throw off the result.

When multiple regular contributions add up to the excess amount, the IRS treats them as removed on a last-in, first-out basis. The most recent contribution is deemed the excess first, and that determines when your computation period begins.

The Deadline That Governs the Calculation

You have until the due date of your tax return, including extensions, to remove the excess and its NIA and have the contribution treated as though it never happened.³ For most people correcting a 2025 contribution, that’s April 15, 2026, or October 15, 2026, with a six-month extension.

If you filed on time but forgot to remove the excess, you get a second window: you can still take the corrective distribution up to six months after the original (non-extended) due date. To use this path, file an amended return with “Filed pursuant to section 301.9100-2” written at the top, report the NIA earnings, and include an explanation of the withdrawal.⁴

Miss the window entirely and the calculation itself becomes moot. You can still pull the excess out, but you no longer add NIA to it, and the 6% excise tax has already started running against the account.²

How the Earnings Are Taxed

The NIA portion is taxed as ordinary income for the year the excess contribution was originally made, not the year you actually receive the money.³ If you already filed the return for that year, you’ll need to amend it to add the earnings.

The excess itself, the principal you’re returning, generally isn’t taxed on the way back out. Traditional IRA excess contributions weren’t deducted, and Roth contributions were always after-tax dollars, so the principal is just your own money coming home.

The 10% early withdrawal penalty used to apply to the earnings portion if you were under 59½. Under the SECURE 2.0 Act of 2022, that penalty no longer applies to NIA on a timely corrective distribution. As long as the correction happens by the return due date (with extensions), the earnings are subject only to ordinary income tax. The change applies to corrections made on or after December 29, 2022.³

Letting the Custodian Run the Math

Your IRA custodian processes the actual withdrawal. Call your brokerage or bank and ask for a corrective distribution, sometimes called a return of excess contribution. Most institutions have a dedicated form. You’ll tell them the excess amount and whether you want them to calculate the NIA or whether you’re supplying the figure yourself.

Many large custodians will run the formula for you if you identify which contribution to remove. Check their number against your own. The variables they use, especially the adjusted opening balance, depend on their records of what else came into the account during the computation period, and errors happen. Keep the statements that show the account values at both ends of the window along with your own calculation.

The custodian can send the money by check or move it to a taxable account. Once the distribution is processed, it gets reported to the IRS on Form 1099-R.⁵

Reporting the Distribution

The 1099-R you receive shows the gross distribution in box 1 (excess plus NIA), the taxable earnings in box 2a, and a distribution code in box 7 that flags this as a correction rather than a normal withdrawal.⁵

Code 8 means the excess was removed in the same calendar year the contribution was made. Code P means the contribution was made in a prior year and removed before the tax filing deadline. Other codes may appear alongside, such as Code 1 if you’re under 59½ or Code J for a Roth IRA distribution.

Code P is where timing tends to catch people. If you over-contributed in 2025 and pulled the money in early 2026, you’ll get a 2026 Form 1099-R, but the earnings belong on your 2025 return. If that return is already filed, file Form 1040-X to add the income.

Keep your NIA calculation, the statements showing your opening and closing balances, and a copy of the corrective distribution request for at least three years.

1
eCFR. 26 CFR 1.408-11 – Net Income Calculation for Returned or Recharacterized IRA Contributions
2
Office of the Law Revision Counsel. 26 USC 4973 – Tax on Excess Contributions to Certain Tax-Favored Accounts and Annuities
3
Internal Revenue Service. Publication 590-A (2025) – Contributions to Individual Retirement Arrangements
4
Internal Revenue Service. Instructions for Form 5329 (2025)
5
Internal Revenue Service. 2025 Instructions for Forms 1099-R and 5498