What happens if you over-contribute to a Roth IRA?

Why over-contributions happen

Common causes include:

1. Contributing above the annual dollar limit (a simple arithmetic mistake, often from contributing to multiple IRAs).
2. Earning more than expected during the year and crossing the Roth income phase-out threshold after already contributing the full amount.
3. Contributing more than your earned income for the year.
4. Contributing to a Roth IRA and later re-characterizing or discovering an eligibility issue.

The penalty

The IRS charges a 6% excise tax on the excess contribution amount for every tax year it remains uncorrected in the account. This is calculated on Form 5329 and is separate from ordinary income tax.

Example

If you over-contributed by $2,000 and don’t correct it, you’d owe $120 (6% of $2,000) for that tax year — and again the following year if it’s still not corrected, and so on until it’s fixed.

How to fix it

Option 1 — Withdraw the excess before your filing deadline. If you remove the excess contribution, plus any earnings it generated, before your tax filing deadline (including extensions), you avoid the excise tax. The earnings portion is taxable income for the year it was earned, and may be subject to a 10% early-withdrawal penalty if you’re under 59½.

Option 2 — Apply it to a future year. If you’re still within a year you’re eligible to contribute, you can treat the excess as part of a subsequent year’s contribution instead of withdrawing it — effectively “using up” next year’s room early.

Option 3 — Withdraw it later. If you miss the deadline, you can still remove the excess to stop future 6% charges, but you’ll owe the excise tax for each year it remained in the account before correction.

Bottom line

Excess Roth IRA contributions are correctable, but the fix is time-sensitive — the earlier you catch and correct it, the less it costs. Your IRA custodian can calculate the exact amount to withdraw, including attributable earnings.