Removing Excess Contributions

What is an excess contribution in a retirement account?

An excess contribution occurs when you contribute more than the IRS allows to a retirement account (such as an IRA, 401(k), or SEP IRA) for a given tax year. This excess is considered ineligible and must be addressed to avoid penalties.

What causes excess contributions?

Excess contributions can result from:

• Personal or spousal IRA contributions that exceed IRS limits.
• Employer SEP contributions that surpass allowable thresholds.
• Improper or ineligible rollovers.
• Contributions made despite income or eligibility restrictions.

What happens if I don’t remove an excess contribution?

If the excess amount is not corrected by the tax filing deadline (including extensions), the IRS may assess a 6% excise tax for each year the excess remains in your account.

To avoid penalties, you must remove the excess amount and any associated earnings by the deadline. For full guidance, refer to IRS publication 590-A or visit irs.gov.

Where can I find the steps to remove an excess contribution?

For requests involving excess removals, please visit Taking a Distribution to locate the required forms and steps to submit.

What is Net Income Attributable (NIA)?

Net Income Attributable (NIA) refers to the earnings generated by the excess contribution while it was in the account. When removing an excess contribution, you must also withdraw the related earnings (NIA), as required by the IRS.

How is NIA calculated, and who is responsible?

NIA is determined based on:

• The proportion of the excess contribution to your total account balance.
• The income earned during the time the excess remained in the account.

Note: Webull does not calculate NIA. You are responsible for determining and reporting the correct NIA amount. We recommend consulting a licensed tax professional for assistance.

Where can I find more information?

For additional details on correcting excess contributions and calculating NIA, consult IRS Publication 590-A or speak with a tax professional.

Webull Financial does not offer tax advice. Any integration with third-party tax software is provided for informational purposes only. For any questions about taxes, including how to file, you should contact a tax professional.