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If your IRA contributions go over the limit

Sometimes it happens—you put more into your IRA in one year than the law allows. Fortunately, there are ways to fix it.

No matter what the reason, contributing beyond the IRS limit could trigger a tax penalty if you don't take steps to handle the excess.

What you can do

There are several ways to correct the mistake, but it's best that you don't wait too long. Here's some help:

If you discover the error before you file your tax return

You can withdraw the excess contributions plus their earnings by your tax-filing deadline—usually April 15.

You can withdraw an excess contribution online by completing the appropriate DocuSign form.

If you discover it after you've filed your tax return

You can either:

  • Remove the excess within 6 months and file an amended return by October 15—if eligible, the excess plus your earnings can be removed by this date.
  • Remove the excess once discovered, even after October 15. You'll need to reduce next year's contributions by the amount of the excess. For example, if your limit is $6,000 and you exceed it by $1,500 in the current year, you can offset the excess by limiting your contributions to $4,500 the following year.

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.

You may want to talk with a tax advisor about the best way to handle any excess contributions.

How it could have happened

Did you use an automatic investment plan?

Maybe your dollar amount was set a little too high. (We still think automatic investment plans are the best and easiest way to help you meet your goals!)

Did you put money into an IRA at another company?

Remember that your annual contribution limit is one amount that applies across all of your traditional and Roth IRAs, and not within each IRA.

Did you forget that you already contributed to your IRA?

You might have used a tax refund, for example, to make an IRA contribution earlier and then contributed again later for the same tax year.

Did you contribute beyond what's allowed for your income level?

Keep in mind that Roth IRA contributions may be reduced or possibly ruled out depending on your modified adjusted gross income (MAGI).

What the penalty could be

The IRS will charge you a 6% penalty tax on the excess amount for each year in which you don't take action to correct the error.

For example, if you contributed $1,000 more than you were allowed, you'd owe $60 each year until you correct the mistake.

If you remove your excess contribution plus earnings before either the April 15 or October 15 deadline, the earnings are taxed as ordinary income.

And if you're under 59½, you'll be subject to a 10% early withdrawal penalty.


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Automatic investment plans

An account option that lets you transfer a fixed amount of money automatically from your bank, savings and loan, or credit union account to your Vanguard IRA on a regular schedule.

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Modified adjusted gross income (MAGI)

An amount used to determine a taxpayer's IRA eligibility. Generally, it's the taxpayer's adjusted gross income calculated without certain deductions and exclusions.