3614. What is the penalty for making excessive contributions to an IRA? If contributions are made in excess of the maximum contribution limit for traditional IRAs (Q 3606) or for Roth IRAs (Q 3607), the contributing individual is liable for a nondeductible excise tax of 6 percent of the amount of the excess for every year the excess contribution remains in the IRA (not to exceed 6 percent of the value of the account or annuity, determined as of the close of the tax year). A contribution by a person ineligible to make the contribution is an excess contribution even if it is made through inadvertence. In the case of an endowment contract described in IRC Section 408(b), the tax does not apply to amounts allocable to life, health, accident, or other insurance. It also does not apply to premiums waived under a disability waiver of premium feature in an individual retirement annuity. The penalty tax does not apply to “rollover” contributions to a traditional IRA or “qualified rollover contributions” to a Roth IRA. It does apply, however, if the “rollover” contribution does not qualify for rollover. The Tax Court did not accept the argument that an IRA created in a failed rollover attempt is not a valid IRA and, thus, the 6 percent penalty should not apply. Likewise, a failed Roth IRA conversion that is not recharacterized is subject to the 6 percent penalty.The IRS has ruled that earnings credited to an IRA that are attributable to a non-IRA companion account maintained at the same financial institution (a “super IRA”) are treated as contributions to the IRA; when coupled with a cash contribution, these amounts may be an excess contribution subject to the penalty tax. An interest bonus credited to an individual retirement account, however, is not included in the calculation of an excess contribution.IRC Sec. 4973(a).Orzechowski v. Comm., 69 TC 750 (1978), aff’d 79-1 USTC ¶9220 (2nd Cir. 1979); Tallon v. Comm., TC Memo 1979-423; Johnson v. Comm., 74 TC 1057 (1980).IRC Sec. 4973(a).See Let. Rul. 7851087.IRC Secs. 4973(b)(1)(A), 4973(f)(1)(A).Martin v. Comm., TC Memo 1993-399; Michel v. Comm., TC Memo 1989-670.SCA 200148051.Rev. Rul. 85-62, 1985-1 CB 153.Let. Rul. 8722068.Site Map/Individual Retirement Plans/Roth IRA/ContributionsSite Map/Individual Retirement Plans/Traditional IRA/Contributionsindividual retirement account annuity2005-01-25T00:00:00ZTaxFactsDefaultArticle114790226-00-tf1.xml227.00;#1808;#1817;#0x010100C568DB52D9D0A14D9B2FDCC96666E9F2007948130EC3DB064584E219954237AF3900242457EFB8B24247815D688C526CD44D009C4E67E972694125ABDA91AC61F5E51FTax Facts 1What is the penalty for making excessive contributions to an IRA? Under what circumstances may contributions be withdrawn or reduced?74100.0000000000TaxFactsDefaultArticle2010-01-14T23:41:41ZSBMEDIA\moss-admin3614. What is the penalty for making excessive contributions to an IRA?Nuco Employeercline22014-06-04T14:26:00Z2014-06-04T14:26:00ZTax Facts Online023041733Microsoft Office Word0144falseTitle13614. What is the penalty for making excessive contributions to an IRA?Albany Law Schoolfalse2033falsefalse14.0000