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Avoid tax penalty for excess Roth contribution

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in Small Business Tax

Q. I accidentally contributed more than $6,000 to my Roth IRA for 2010. (I’m 60 years old.) Am I in trouble? M.C.H., Cleveland

A. Not necessarily. Contact your Roth IRA custodian for instructions. Generally, the amount that must be withdrawn is computed on Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts. If you fail to withdraw the excess contribution, you’re liable for a 6% excise tax penalty on the overage.

Tip: The 6% penalty applies for each year you neglect to correct the error, so address this problem promptly.

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