Fixing an excess IRA contribution or a missed RMD: avoiding the 6% and 25% taxes and asking for a waiver on Form 5329

If you put too much in an IRA, the excess is taxed at 6% every year until you fix it. Remove the excess and its earnings by the filing deadline including extensions (usually October 15) and there's no 6% tax; the earnings are taxable but not subject to the 10% early withdrawal tax. A missed RMD is taxed at 25% of the shortfall, reduced to 10% if you take it and file Form 5329 within the correction window, and with reasonable cause you can ask the IRS to waive it entirely. Most IRA mistakes can be fixed, and the sooner, the cheaper.

What counts as an excess contribution

Over the limit: More than $7,500 ($8,600 at 50+) to traditional and Roth IRAs combined for 2026. Contributing at more than one brokerage is the easiest way to overshoot.

No earned income: Contributions can't exceed your wages or net self-employment income. If you're retired with only pension and investment income, or excluded all your foreign wages under the FEIE, you have nothing to contribute from.

A Roth contribution over the income limit: For 2026, above $168,000 single or $252,000 joint, the entire Roth contribution is excess; inside the phase-out range, anything above your reduced limit is excess.

A second 60-day rollover within 12 months: The second one isn't a valid rollover, and the redeposited money can become an excess contribution.

How to fix an excess contribution

Option 1, withdraw it with earnings by the deadline: Before your filing deadline including extensions, have the custodian return the excess plus the net income attributable to it. The earnings are income for the year the contribution was made, and since SECURE 2.0 they're no longer subject to the 10% tax. That avoids the 6% for the year. If you already filed on time, you have six months after the original due date to correct it and amend.

Option 2, recharacterize a Roth contribution as traditional: For an excess Roth contribution, recharacterize the contribution and its earnings as a traditional IRA contribution by the deadline including extensions. If your income is too high to deduct it, you can then consider converting it to a Roth, which is the backdoor Roth.

Option 3, apply it to next year: Contribute less next year so the excess uses up next year's limit. You still owe the 6% for the current year, but not after that.

If you find it after the deadline: Withdraw just the excess (no earnings calculation), and report the 6% on Form 5329 for each year that has passed (Part III for traditional, Part IV for Roth).

Missed RMDs: 25% and 10%

Who has to take them: Owners of traditional, SEP and SIMPLE IRAs from the year they turn 73 (born 1951–1959) or 75 (born 1960 or later), and beneficiaries under the inherited IRA rules. Heirs of owners who had already started RMDs must take annual withdrawals during the 10 years, required from 2025.

The tax: 25% of the shortfall, reduced to 10% if you take the shortfall and file a return reflecting the tax within the correction window.

When the correction window ends: The earliest of the date the IRS mails a deficiency notice for the tax, the date the tax is assessed, or the last day of the second tax year after the year the tax applies.

Asking for a waiver: Form 5329, Part IX

When it applies: The shortfall was due to reasonable error (a custodian mistake, illness, a death in the family, a misunderstanding of the inherited IRA rules), and you're taking reasonable steps to fix it.

How to fill it in: Take the shortfall out first. Complete lines 52 and 53 as usual, then write "RC" and the amount you want waived, in parentheses, on the dotted line next to line 54, subtract it from the total shortfall, and attach a statement explaining what happened and when you fixed it. The IRS reviews the request and notifies you if it's denied and you owe tax.

What the statement should cover: When and why the RMD was missed, when you found out, when and how much you took to fix it, and how you'll prevent it next time (for example, automatic distributions). Attach the custodian's confirmation of the make-up distribution.

A late 60-day rollover

Self-certification: If you missed the 60 days for one of the reasons listed in Rev. Proc. 2020-46 (such as a custodian error, a lost check, serious illness of you or a family member, a death in the family or severe damage to your home), deposit the money as soon as practicable after the reason ends (generally within 30 days) and give the receiving custodian a self-certification letter, and it can be treated as a rollover.

If no listed reason applies: For now you'd request a private letter ruling. On October 22, 2026, the IRS announced the new IRA Compliance Resolution System (Rev. Proc. 2026-33), effective May 1, 2027; 60-day waiver requests will move to ICRS over 2027 and 2028, and certain errors caused by custodians and other service providers can also be corrected through it.

Statutes of limitation

Since SECURE 2.0, filing your Form 1040 starts the clock for these taxes: generally 3 years for a missed RMD and 6 years for an excess contribution, even without a separate Form 5329. That isn't a reason to leave it alone: an uncorrected excess contribution is taxed again every year.

If the IRS sends a letter

The IRS matches custodians' Forms 5498 and 1099-R and may write about an excess contribution or unreported income. Don't pay right away. Compare the 5498 and 1099-R with the 8606 and 5329 you filed to see whether it's a real excess or a contribution year or recharacterization that wasn't reported correctly. If it's the latter, a written response with documentation usually resolves it.

For the full set of IRA rules, including choosing traditional or Roth, backdoor and mega backdoor Roths, conversions, early withdrawal exceptions, RMDs, inherited IRAs and cross-border status, see our guide to IRAs from first contribution to final withdrawal. To run your own numbers, book a free 15-minute call or add WeChat YCLUSA. YCL CPA doesn't sell financial products or manage investments; we get the tax right and the forms filed, and results depend on your facts and IRS rules.