Excess contribution

Excess contribution

The amount by which an IRA contribution exceeds the allowable limits. If an excess contribution is not properly corrected, a 6% IRS penalty applies.

Excess Contribution

Contributions made to an IRA over and above the maximum allowable contribution. One must withdraw excess contributions from the IRA in the current tax year or be subject to a 6% excise tax. Excess contributions are banned in order to remove the incentive for excessive tax avoidance.

Excess contribution.

An excess contribution occurs when you put more money into your individual retirement account (IRA) than the law allows.

You can withdraw the excess amount plus earnings by the date your tax return is due for the year, including extensions. You'll owe tax on the excess in the year you deposited it in your account but no penalty. Earnings are taxed in the year you receive them.

If you leave the excess in the IRA, you'll owe a 6% excise tax on that amount every year it remains in the account. If you miss the deadline for taking the money out without penalty, one solution may be to contribute less the following year so that your combined contributions are less than the total for the two years.

The term excess contributions may also be used to describe after-tax contributions that employees may legally make to their employer-sponsored retirement plans. This situation may arise if your yearly contribution to the plan, based on the percentage of salary your employer permits, is less than the annual federal limit.

Finally, plan sponsors may owe a 10% tax penalty if their plans do not distribute or correct excess contributions within two and a half months after the end of the plan year.

References in periodicals archive ?
The regulations bring to an end a revision process that began with Notice 2000-39, (56) which made the calculation of attributable income more realistic, by (1) basing it only on the period during which the IRA held the excess contribution and (2) allowing income to be negative as well as positive.
While sufficient information to calculate the tax had been entered, we had to manually type in the excess contribution to get the tax to calculate.
According to the IRS, the taxpayer's failed Roth IRA conversion resulted in a distribution from a traditional IRA in 1998 (includible in his 1998 income) and an excess contribution to the Roth IRA (subject to the Sec.
However, any excess carryovers are limited; a decedent's contribution carryover can be taken on the final return (subject to the appropriate percentage limits), but any further excess contribution amounts are lost.
This amount is determined by looking to how the excess contribution is treated.
1502-24(c) provides that, because deductible contributions include contributions made in the tax year and excess contribution carryovers from consolidated return years or SRLYs, excess contributions (including contributions made in a SRLY) may be applied against the consolidated taxable income, despite the fact that the contributing member had little or no taxable income in the tax year.
Driven primarily by public sector activities, backed essentially by domestic demand, characterised by an improved diversification of the economy, and reflected in the decline in the excess contribution of the petroleum sector to GDP growth vis-a-vis the non-petroleum sector, the overall growth process is expected to be sustainable moving forward," indicated the report.
Any excess contribution not allowed will be carried forward indefinitely until claimed as a deduction.
For the record, a number of our new BHB fixtures this year means an actual increase in prize-money, with an excess contribution from Northern Racing and not the Levy Board.
In any year that excess contributions are made to a Coverdell Education Savings Account, a 6% excise tax is imposed on the excess contribution.
All three already had contributed to the legal limit, so the endorsement amounted to an excess contribution of $10,000 from each.
The Tax Court held on July 5 that the IRS properly assessed excise tax on a taxpayer's excess contribution to a Roth IRA, since the attempted tax-free conversion of a regular IRA to a Roth IRA lacked economic substance.