By Sarah Brenner, JD
IRA Analyst

Are you questioning that IRA contribution you made for 2018? Maybe you made a Roth IRA contribution and then discovered your income was too high. Maybe you made a traditional IRA contribution but you were ineligible due to your age. You may have made a traditional contribution and just changed your mind. You’d rather contribute to a Roth IRA or maybe not contribute at all. There is good news if you act quickly. You can fix these issues by correcting your 2018 IRA contribution by the upcoming October 15, 2019 deadline.

October 15, 2019 Deadline

When it comes to the timing for correcting a contribution, the key deadline is October 15 of the year following the year for which the excess contribution is made. The statutory deadline is actually the tax-filing deadline including extensions. However, the IRS has said that the applicable deadline for taxpayers who file a timely return is six months after the due date for filing the tax return, excluding extensions (October 15 of the year following the year for which the contribution was made).

Why is this date so important? A 6% penalty applies to excess contributions. This penalty is not a one-and-done thing. It will apply every year that an excess contribution remains in the IRA. The only way to avoid the 6% penalty when an excess contribution occurs is to correct it by the October 15 deadline. Also, if you are just changing your mind about a contribution that you are actually eligible to make, your ability to correct the IRA contribution will end with the October 15 deadline.


When you correct an IRA contribution before the deadline, you have two choices when it comes to fixes. You can recharacterize the contribution or withdraw it. With either option, the slate is wiped clean and the contribution is treated as though it was never made to the IRA where the excess occurred.

Net Income Attributable

With both choices, the net income attributable (NIA) must accompany the contribution either when it is recharacterized or when it is withdrawn. The NIA can be a loss if the IRA has lost value. The calculation of the NIA is based on the entire value of the IRA during the time the contribution was in the IRA. The NIA is calculated using a special IRS-approved formula. Many times, the IRA custodian will do the calculation. A worksheet with the formula can also be found in IRS Publication 590-A.

Going with a Withdrawal

One option for correcting an IRA contribution is by withdrawal. Be sure to tell the IRA custodian that the distribution is a return of an excess contribution. With this method of correction, the contribution and the NIA are distributed. The contribution is not taxable. However, the earnings would be taxable in the year in which the contribution was made. They would also be subject to the 10% penalty if you are under age 59 ½ and an exception does not apply. The IRA custodian will use special reporting on Form 1099-R to reflect that this is a corrective distribution before the deadline.

Going with Recharacterization

Recharacterization is often overlooked as a strategy to fix contributions. Recharacterization is a way to move an unwanted tax-year contribution from a traditional IRA to a Roth IRA, or vice versa. If a contribution is recharacterized it will move from one type of IRA to another in a reportable nontaxable transfer. The contribution will be treated as though it had been originally made to the IRA to which it is recharacterized. Recharacterization is a very useful tool. However, it does have its limits. A contribution cannot be recharacterized from one tax year to another.

Seek Professional Advice

Correcting IRA contributions can be complicated. To be sure that no mistakes are made, this is a good time to seek the advice of a professional tax or financial advisor.