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Yes. If you contribute more than the allowed limit ($7,500 for those under 50; $8,600 for those 50+ in 2026), the IRS imposes a 6% excise tax on the excess amount for every year it remains in the account.
How to Avoid the 6% Penalty
To avoid the excise tax entirely, you must withdraw the excess contribution and any earnings (interest/gains) generated by that money by the due date of your tax return, including extensions (typically October 15 of the following year).
- Tax on Earnings: You must report the withdrawn earnings as taxable income for the year the contribution was made.
- Penalty Relief: Thanks to recent tax law changes (SECURE 2.0), the 10% early withdrawal penalty no longer applies to the earnings you take out as part of a corrective distribution, regardless of your age.
What if I miss the deadline?
If you discover the error after the tax filing extension deadline has passed:
- You must pay the 6% excise tax for that year (using IRS Form 5329).
- To stop the penalty from repeating the following year, you can either withdraw the exact excess amount (you do not need to withdraw earnings after the deadline has passed) or "carry forward" the excess by contributing that much less in the next tax year.
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