USTaxPenaltySaverExcess Contribution Penalty IRC § 4973
Over-contributed to your IRA, 401(k), or HSA? The 6% penalty applies every year until you correct the excess.
Correct before your tax deadline to avoid the penalty entirely. Learn the 2025 contribution limits and correction methods.
How the 6% Penalty Works
The penalty compounds each year until you remove or absorb the excess
Penalty Calculation
Reported on Form 5329, Part III (Traditional IRA), Part IV (Roth IRA), or Part VI (HSA)
Compounding Example
$3,000 excess contribution left uncorrected for 3 years:
Plus income tax on withdrawn earnings and potential 10% early withdrawal penalty
2025 Contribution Limits
SECURE 2.0 added super catch-up contributions for ages 60-63
Traditional & Roth IRA
Combined limit for all IRAs. Roth has income phase-outs.
401(k) / 403(b) / 457(b)
Employee deferral limit only. Employer match is separate.
SIMPLE IRA
Employee contribution limit. Employer match is separate.
HSA
Requires HDHP coverage. Prorated for partial year.
SEP IRA
Employer contribution only. Lesser of $70,000 or 25% of compensation.
Coverdell ESA
Annual limit per beneficiary across all contributors. Income phase-outs apply.
How to Correct Excess Contributions
Three methods to fix excess contributions
Withdraw Before Deadline
Remove excess plus earnings before your tax filing deadline (including extensions).
- • Must include allocable earnings
- • Earnings are taxable income
- • May owe 10% early withdrawal penalty on earnings
- • Best option if caught early
Carry Forward (Absorb)
Under-contribute next year so the excess is "absorbed" as a valid contribution.
- • Still pay 6% for each year excess exists
- • Money stays invested
- • No need to calculate earnings
- • Good if under-contributing anyway
Recharacterize
Convert Roth contribution to Traditional (or vice versa) if eligible for the other account type.
- • Useful for Roth income limit issues
- • Must recharacterize plus earnings
- • Must be before deadline + extensions
- • Not available for 401(k) conversions
Important Correction Deadlines
For 2024 Contributions
- • April 15, 2025 - Tax filing deadline
- • October 15, 2025 - Extended deadline (if you filed extension)
- • Withdraw excess + earnings by deadline = no 6% penalty
After Deadline
- • 6% penalty applies for 2024
- • Remove excess to stop future penalties
- • Or carry forward to absorb in future years
Excess Contribution Penalty FAQs
The excess contribution penalty (IRC § 4973) is a 6% annual tax on contributions to retirement accounts that exceed the allowable limits. This penalty applies each year the excess remains in the account, making prompt correction essential to avoid compounding penalties.
For 2025, the Traditional and Roth IRA contribution limit is $7,000 for those under 50, plus a $1,000 catch-up contribution for those 50 and older (total $8,000). SECURE 2.0 added a super catch-up for ages 60-63: an additional $1,500 (total $8,500). These limits are combined for all IRAs you own.
For 2025, the 401(k) employee deferral limit is $23,500 for those under 50. The catch-up contribution for ages 50+ is $7,500 (total $31,000). SECURE 2.0 added a super catch-up for ages 60-63: the greater of $11,250 or 150% of regular catch-up (total $34,750).
To avoid the 6% penalty entirely, remove the excess contribution plus any earnings attributable to it before your tax filing deadline (including extensions). For 2024 contributions, this typically means by October 15, 2025. If you miss this deadline, you can still remove the excess to stop future penalties, but you'll owe the 6% tax for years the excess was in the account.
Yes, if you contribute less than the maximum in the following year, your excess contribution can be "absorbed" by treating it as a contribution for that year. However, you'll still owe the 6% penalty for each year the excess was in the account before being absorbed. This is called the carry-forward method.
If your modified AGI exceeds the Roth IRA income limits, your contribution may be partially or fully excess. For 2025, the Roth IRA phase-out begins at $150,000 for single filers and $236,000 for married filing jointly. You can recharacterize the contribution to a Traditional IRA or withdraw it before the deadline to avoid the penalty.
When removing excess contributions, you must also remove allocable earnings. The calculation is: Excess × (Account value at removal - Account value at contribution) ÷ Account value at contribution. Your custodian can usually calculate this for you. The earnings portion is taxable income and may be subject to the 10% early withdrawal penalty.
IRC § 4973 applies to Traditional IRAs, Roth IRAs, Coverdell ESAs, Archer MSAs, HSAs, and ABLE accounts. For employer plans like 401(k)s and 403(b)s, excess deferrals are handled differently under IRC § 402(g) but still require correction.
Calculate Your Excess Contribution Penalty
Get a detailed estimate and learn how to correct your excess contribution
This calculator provides estimates for informational purposes only. Excess contribution rules can be complex based on your specific circumstances. Consult a qualified tax professional for advice regarding your specific situation. We do not provide legal, tax, or financial advice and do not represent you before the IRS.