Over Contribution to Non Deductible IRA

[simplemark1]

On April 15, 2025 I contributed twice the allowed amount  ($8000 x 2) to my Non Deductible IRA for tax year 2024.  On Dec 4, 2025 I received notice of the double contribution from my custodian.  When I filed my 2024 taxes, I didn't include the double contribution, only the $8000 that I'm allowed on form 8606 for Non Deductible IRAs.

I know I need to correct the situation, but I'm unclear on my options.  I read that I must remove the excess contribution, and pay a 6% penalty on the over contribution and a 10% penalty on the earnings.  I'm not sure if it makes a difference that I made the excess 2024 contribution in 2025, and I didn't include it in my tax filing, and I plan to correct it before year end 2025.  Can I avoid the 6% penalty?  How would I handle the paperwork?  Must I file an amended 2024 return even though I didn't include the excess contribution in my tax filing?  Thanks!

[fanfare]

It is past the Tax Day for 2024 plus extensions .

Since you marked the contribution for 2024, you will have a penalty of 6% and you amend 2024.

You will have another penalty for  2025 unless you complete and execute the "distribution" form for the amount of excess - $8,000 - by 12/31/2025.

Your 2025 Fomr 5329 will show the resolution.

@simplemark1 

[Opus 17 · Accepted solution]

For your 2024 tax return:

It is too late to use the special removal procedure. You must file an amended return, report the excess contribution, and pay the 6% penalty.  It does not matter if the contributions were made in 2024 or 2025, only that the contributions were designated for 2024.

For your 2025 tax return:

If you make no new IRA contribution for 2025, you can apply the excess from 2024 to your 2025 limit.  You "use up" the 2024 excess by counting it as your 2025 contribution.  Your tax return should report the excess from 2024, and you will get a form 5329 that shows the excess carryover, and how you applied it to 2025, and you will not have a further penalty.  If you already made a 2025 contribution, you need to remove that as an excess contribution so you can apply the 2024 toward 2025.  You have until April 15, 2026, to remove the excess 2025 contribution, but the paperwork and tax return will be easier if you remove it before December 31, 2025 so you get a 1099-R for it.  

[markmartian]

Thank you for the clear explanation.  Bummer that I have to pay the 6% penalty, but lesson learned.