excess IRA contribution
We have a case where someone put $400k inheritance into an IRA. Unfortunately, it was not previously in an IRA. So we have an excess contribution that sat dormant for a couple of years. Now the IRS wants it’s penalty for the excess. Can this be paid in installments?
Permalink Submitted by Alan Spross on Wed, 2012-09-12 19:10
Perhaps the person can request an installment plan from the IRS, but they will have plenty of liquid assets once the excess of removed from the IRA. The excess contribution must be removed from the IRA account. If this contribution was made prior to 2011, the person will owe 6% for each year that the excess sat in the IRA. If the excess was made in 2011 or later, the withdrawal can be made without the 6% penalty each year, but then any earnings must also be withdrawn.