Craig contributes to his IRA monthly and when he has an extra lump sum of money he adds it to his account. The maximum contribution amount is $5,000; this year Craig contributed $5,500. What amount will his excess contribution penalty be?

Question

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For those who contribute beyond the maximum amount into an IRA will face an excess contribution penalty of 6 percent. The penalty will be charged each year the excess contribution remains in the account. The individual can avoid paying the tax by withdrawing the excess contribution and any earning before the due date of the federal income tax return. The earnings on the excess contributions are treated as gross income for the taxable year.

Craig Contributes to His IRA Monthly and When He Has