Question

If I contributed $6,000 to each of my two Roth IRA accounts, will I owe a penalty?

Answer

Yes. You’re limited to total Roth IRA contributions for the year that are the lesser of:

  • 100% of your compensation
  • $6,000 to $7,000 if age 50 or older. If you contribute more than the amount you’re allowed, you’ll pay a 6% excise tax.

To avoid the 6% excise tax, contact your IRA plan administrator to request either of these:

  • Redesignate the excess IRA contributions to the 2020 tax year. You can only do this if you make the contribution after year-end and before the due date of the return.
  • Withdraw the excess contributions and their earnings. You must do either by your return’s due date.

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