Ask Terry Questions Excess IRA contribution

Excess IRA contribution

By Terry Savage on April 06, 2024 | Taxes & Economy

Hello Terry,
I watch you at WGN and enjoy your topics, very helpful. I have a personal question regarding excess contribution to an IRA. I’m currently unemployed and have auto-contributions made to my Traditional IRA.
However, when I filed my income tax return, I was not permitted to deduct the contributions because I did not have earned income.

So in order to avoid the 6% penalty, I have to withdraw my contribution $5K and any earnings/losses.
My question is how do you figure out the amount for earnings/losses? I looked at my statements and compared the Net Portfolio Value, and subtracted December from January. I’m not sure how to configure the excess earnings. Would you please advise best way to go about this.

I appreciate your help.

Best regards,


Terry Says

I don’t think the IRS is going to be too picky about this. Just withdraw your contribution and take a token $100 out as your own evaluation of what it might have earned. Then argue it out with them if they every come after you. That’s doubtful. They have bigger fish to fry!



a personal
finance question