Excess Contributions
I made an excess contribution of $2000 to a Roth a couple of years ago and have been paying the 6% excise tax every year. If I make a contribution of $3500 ($2000 less than the $5500 limit) to a non-deductible Traditional IRA this year, will that correct the excess contribution and end the excise tax?
Permalink Submitted by Alan - IRA critic on Mon, 2018-04-02 14:45
No. A contribution to a different type of IRA cannot erase an excess from another type. If you qualified for a Roth contribution for 2017 and contributed 2,000 less than the contribution you qualified for your excess would be applied to 2017 and erase the 6% excise tax for 2017 when completing Form 5329. If you did not qualify in 2017 but will in 2018 the same procedures apply. Otherwise, before year end 2018 you need to simply request a distribution of 2,000 from your Roth IRA. Earnings stay in the Roth. This will eliminate the excise tax for 2018. You may as well wait until later in the year to remove the 2,000 if you will not qualify for a regular contribution since you do not incur another excise tax until the end of 2018.