Question

Mack says he thinks he has contributed too much to his Roth IRA for the year. Which of the following is true?

I. An excess contribution to a Roth IRA will results in a 6% excise tax on the excess amount.

II. If the excess amount, plus interest, is withdrawn by December 31 of the following year, the excess may be withdrawn without the excise tax penalty.

Neither I nor II

Both I and II

I only

II only

Answer 1

Both I and II

If your total IRA contributions (both Traditional and Roth combined) are greater than the allowed amount for the year in your situation, and you have not withdrawn the excess contributions, you must complete Form 5329 to calculate a 6% penalty tax on the excess contribution

Excess Contributions Withdrawn by Due Date of Return--You will not have to pay the 6% tax if you withdraw an excess contribution made during a tax year and you also withdraw any interest or other income earned on the excess contribution. You must complete your withdrawal by the date your tax return for that year is due, including extensions.