Is Return of Excess from an IRA Subject to Penalty?

Be aware you’ll have to pay a 6% penalty each year until the excess is absorbed or corrected. Note: If you contributed to a Roth and traditional IRA in the same tax year and your total contribution went over the allowable IRA amount, IRS regulations require you to remove the excess from the Roth IRA first.

How does IRS track your IRA contributions?

IRA contributions will be reported on Form 5498:

• IRA contribution information is reported for each person for whom any IRA was maintained, including SEP or SIMPLE IRAs.
• An IRA includes all investments under one IRA plan.
• The institution maintaining the IRA files this form.