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ROTH IRA CHECK-UP AFTER TAX FILING DUE DATE: Correcting Roth IRA Excess Contributions

Last Updated May 10, 2017

By www.RetirementDictionary.com staff

Individuals may contribute to a Roth IRA only if their modified adjusted gross income (MAGI)s do not exceed a certain amount. See table below. 

Tax Filing Status

2016 MAGI

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2017 MAGI

Allowed contribution

Single

$117,000 or less

$118,000 or less

100%

$117,000 - $132,000

$118,000 - $133,000

Partial

$132,000 or more

$133,000 or more

None

Married filing jointly

$184,000 or less

$186,000 or less

100%

$184,000 - $194,000

$186,000 -$196,000

Partial

$194,000 or more

$196,000 or more

None

Married filing separately

Less than $10,000

Less than $10,000

Partial

$10,000 or more

$10,000 or more

None

If you made a contribution to a Roth IRA for 2016 and your MAGI exceed the limit (based on your tax filing status), your Roth IRA contribution is an ‘excess contribution’.

 

If such is the case, you must either: recharacterize the excess contribution to a traditional IRA – which can be done only if you are under age 70½ as of 12/31/2016, or distribute the amount as a 'return of excess contribution’

Whichever option you choose, it must be done by your 2016 tax filing due date, plus extensions.

If you filed your tax return by the due date, you received an automatic 6-months extension to perform either the recharacterization or the return of excess contribution. Failure to do either by the deadline will result in you owing the IRS a 6% excise tax for every year the amount remains in the Roth IRA as an excess contribution.

Note: An excess Roth IRA contribution that remains in your Roth IRA after the deadline automatically becomes a Roth IRA contribution for the following year, and continues to roll over to future years until the amount is no longer an excess.

Please contact your financial or tax advisor for assistance with determining whether your Roth IRA contribution is an excess contribution, and if so, how you should proceed.