Penalties & Interest? on Excess Roth Contribution
Does the IRS always charge interest in addition to the annual 6% additional tax computed on line 25 of form 5329 on excess contributions to Roth IRAs?
In December 2006 I filed forms 5329 for excess contributions in tax years 2004 and 2005 and sent in a check for the annual 6% additional tax. I was over 59 1/2 and had the Roth for 5 years at the time of the excess contributions. The IRS is charging me interest on the amount of the additional tax from the tax filing date to the present.
For the tax year 2004 correction, interest on the amount of the additonal tax was charged from 4-15-05 to 12-27-06 and thereafter on the accumulated interest until 3-24-08 when they took total accumulated interest amount from my 2007 overpayment. Tax year 2005 was similar. I naively hoped that volunteering the info that I had made the excess contribution error and paying the 6% annual additional tax was enough of a penalty. Is there any way to appeal the interest charges?
Permalink Submitted by Alan Spross on Wed, 2008-04-16 22:38
I doubt it. While I have been adding the statement ” the IRS will likely bill you for interest on the late payment of the penalty”, there is no way to determine how consistent the IRS actually is in pursuing the interest charge. When either a penalty or tax is paid late, you may expect an underpayment penalty (interest in most cases) to be billed.
Of course, the fact that your Roth was fully qualified at the time is not material to excise tax charges, which are totally different than early withdrawal penalties, from which you would be exempt after 59.5.