How to fix an excess Roth IRA contribution before it costs 6%

Nobody plans an excess Roth IRA contribution, which is why it has become the account’s signature silent error. The money goes in early — often in January, on autopilot — and the problem surfaces more than a year later, when the tax software totals your modified adjusted gross income and delivers the verdict: you were never allowed to put in that much.

The mistake is built into the product’s design. Eligibility for a Roth IRA depends on income for the entire year, yet contributions open on its first business day — so funding early means betting on a number that will not be final for twelve months. A December bonus, vested RSUs, a July raise: any can disqualify you retroactively. Fortunately the tax code provides three exits, and the right one depends on how much time you have left.

An excess Roth IRA contribution triggers a 6% excise tax for every year it stays in the account, but it is fixable. Before your tax-filing deadline — extensions included, in practice mid-October if you filed on time — you can withdraw the excess plus its earnings (the net income attributable, or NIA) or recharacterize the contribution to a traditional IRA. After that window, you pay the 6% for each year elapsed and either withdraw the bare excess or absorb it against a future year’s limit on Form 5329.

How the excess sneaks in

For 2026, IRS Notice 2025-67 places the Roth income phase-out at a MAGI of $153,000 to $168,000 for single filers and $242,000 to $252,000 for married couples filing jointly. Below your range you may contribute the full $7,500 ($8,600 with the catch-up for savers 50 and older); inside it the allowance shrinks proportionally, hitting zero at the top. Where you land turns on how modified adjusted gross income is calculated — the quick definition lives in our MAGI glossary entry.

The second trap needs no high income at all. The $7,500 cap — broken down in our 2026 retirement contribution limits guide — is combined across every IRA you own, traditional and Roth alike. Fund a Roth at one brokerage and a traditional IRA at another, and anything past the shared ceiling is excess — no bonus required.

What waiting costs

Section 4973 of the Internal Revenue Code imposes a 6% excise tax for each year the excess remains — an annual toll, not a one-time fine, repeating every December 31 it survives. The base is the smaller of the excess itself or the total value of your Roth IRAs at year-end, so a market drop can shrink the bill but never erase it. You calculate and report the tax on Form 5329.

Three exits, ordered by the calendar

Every fix runs through one of three lanes, divided by your tax-return due date, extensions included — and filing on time grants an automatic six-month correction window, to mid-October of the following year.

Exit	Deadline	What leaves the Roth	Tax consequences
Corrective distribution	Return due date, extensions included	Excess + earnings (NIA)	Earnings taxed in the year you contributed; no 10% penalty since SECURE 2.0
Recharacterization	Same deadline	Excess + earnings, to a traditional IRA	Traditional contribution from day one; likely nondeductible (Form 8606)
Withdraw late or absorb	After the deadline	The bare excess only — or nothing yet	6% per year elapsed (Form 5329); no NIA; absorption uses a future year’s limit

Exit one: the corrective distribution and the NIA math

The cleanest fix pulls the excess back out before the deadline, along with what it earned inside — the net income attributable. Treasury Regulation 1.408-11 prescribes the formula: excess × (closing balance − opening balance) ÷ opening balance, measured over the period the money sat in the account. The formula deliberately ignores your specific investment — the whole account’s return controls — and if the account fell, the NIA turns negative and you withdraw less than you contributed.

The earnings come out taxed as ordinary income in the year the contribution was made, per IRS Publication 590-A, which can mean reopening a return you already filed. And since SECURE 2.0, corrective earnings no longer carry the 10% early-withdrawal penalty for savers under 59½.

Exit two: recharacterize and take the back door

If you would rather keep the money invested, recharacterization moves the contribution — earnings in tow — to a traditional IRA by the same deadline, and the law treats it as if it had gone there from day one. A persistent myth says the Tax Cuts and Jobs Act killed this move; in fact TCJA eliminated only recharacterizations of conversions — those of contributions remain fully legal.

At an income high enough to create the excess, the traditional contribution is almost certainly nondeductible, so you record the basis on Form 8606. The natural sequel is the backdoor Roth IRA, the fully legal route into a Roth when your MAGI clears the ceiling: convert the recharacterized dollars back to Roth status. One caution — if any traditional IRA of yours holds pre-tax money, the pro-rata rule will tax part of that conversion.

Exit three: past the deadline

Once the window closes, the 6% for each elapsed year is owed and cannot be unwound, but the bleeding stops two ways. Either withdraw the bare excess — past the deadline, no NIA calculation applies — or absorb it against the limit of a future year in which you have room: one where your MAGI drops back under the phase-out, say. Form 5329 carries it forward year by year until it reaches zero.

A worked example: the bonus that halved the limit

Priya, a single filer, put $7,500 into her Roth in January 2026. A December bonus pushed her MAGI to $160,500 — exactly the midpoint of the $153,000-to-$168,000 phase-out. The allowed contribution falls proportionally across the range (the IRS rounds the result; the midpoint keeps the fraction exact), so halfway means half the limit: Priya could keep $3,750, and the other $3,750 is excess.

She catches it the following March, preparing that very return. Her Roth was worth $40,000 when she contributed and $44,000 when she corrects — a 10% gain for the whole account. The NIA formula applies that return to the excess: $3,750 × 10% = $375. She withdraws $4,125 and reports the $375 as 2026 income — conveniently, the return she is filing, with no 10% penalty thanks to SECURE 2.0 — and the excess is treated as if it never happened. No Form 5329, no excise.

Had she shrugged, Section 4973 would have charged 6% of $3,750 — $225 — for 2026, again for 2027, and every year until she acted. The fix costs income tax on $375; the shrug costs $225 a year indefinitely.

The caveats that actually bite

Three details bite in practice. First, timing: NIA is income in the year the contribution went in, not the year you fix it — tidy for Priya, whose return was still open, painful if you have already filed. Second, negative NIA is not optional: if the account lost money, you withdraw less than you put in and there are no earnings to tax. Third, procedure: ask your custodian for a return of excess contribution so the paperwork is coded as a correction — an ordinary withdrawal of the same amount cures nothing.

Make the check part of filing season

The calendar is generous — file on time and you have until mid-October of the following year to fix the mistake free of excise. So fold the check into tax season itself: compare your final MAGI against the phase-out before celebrating the refund, and if your income has cleared the ceiling for good, switch to the backdoor route and stop creating an excess to fix.

Sources

• Cornell Law — 26 U.S. Code § 4973 — the 6% excise tax, applied to the lesser of the excess or the year-end account value.
• IRS — Instructions for Form 5329 — reporting the excise tax and absorbing an excess in a later year.
• IRS — Publication 590-A — corrective distributions, recharacterizations, and taxation of withdrawn earnings.
• IRS — Notice 2025-67 — 2026 Roth phase-out ranges and the $7,500 / $8,600 contribution limits.

Phase-out and limit figures are the IRS-published 2026 amounts; the worked example is illustrative, and your own correction depends on filing status, deadlines, and account performance.