Remove the excess once discovered, even after October 15.You will have to reduce next year's contributions by the amount of the excess. So, if you contribute to a Roth IRA and make more money than expected, you may have to withdraw all your contributions. Your Adjusted Initial Balance (AOB) is the balance of your Roth IRA before your excess contribution, plus all contributions, including excess contribution, consolidations, and account transfers you have made since the excess contribution. Those who have contributed too much to a Roth IRA, perhaps because they didn't realize that their high income limited the amount they could legally contribute, may be able to correct their mistake by transferring their excess contribution and any attributable gains from a Roth IRA to a traditional IRA.
If, in a previous year, you deducted an excess contribution for a year in which you did not exceed the IRA contribution limit, you can still eliminate the excess of a traditional IRA without including it in your gross income by filing an amended return without the deduction. An excess IRA contribution usually occurs if you contribute more than the contribution limit, contribute more than your earned income, or make an undue cumulative contribution to an IRA (for example, if you contribute too much to your individual retirement account (IRA), you can result in additional taxes and penalties for each year the excess money remains in your account. Fixing excess IRA contributions can be a bit tricky, but it's still worth maximizing IRA contributions up to the maximum of their annual limits. The penalty for excessive IRA contributions is 6% per year for each year this money remains in your account.
In general, to avoid these errors, it's a matter of keeping track of how much you contribute to all your IRAs during the year and understanding any other rules, such as the income limits of Roth IRAs, that may restrict the amount you can contribute during the year.