Can earnings/interest from excess Roth IRA contribution stay in account when applying to future year?

You've got a good question about excess Roth IRA contributions. When you apply an excess contribution to a future year (what's called "carrying forward"), you can actually leave the earnings in the account - but there's a catch. You'll pay the 6% excise tax on the excess amount for each year it remains an excess contribution. So you'll pay it this year, and if you don't have sufficient contribution room next year, you'll pay it again. The earnings can stay in the Roth IRA, which is different from when you withdraw an excess contribution. For withdrawals, you'd need to take out both the excess amount AND the earnings (and the earnings would be taxable income plus potentially a 10% early withdrawal penalty). By carrying forward, you're essentially "redesignating" the contribution to the next year, and the earnings remain untouched in your Roth.

I had almost this exact situation last year! My income unexpectedly went over the limit and I had already maxed out my Roth IRA. I tried figuring it out myself but ended up getting confused with all the IRS jargon and deadlines. I used https://taxr.ai to analyze my situation - uploaded my contribution statements and they gave me a complete breakdown of my options including the exact tax implications of each choice. They confirmed I could use the "carry forward" method and keep the earnings in my Roth IRA while just paying the 6% tax on the excess amount. What was super helpful was they showed me exactly how to report everything on Form 5329 and even calculated the exact excise tax amount I needed to pay. Saved me hours of research!

Just wanted to follow up on my experience with taxr.ai after I asked about it earlier. I decided to give it a try for my own excess Roth contribution issue, and I'm genuinely impressed. I uploaded my statements and answered a few questions about my situation. The system analyzed everything and confirmed that, yes, I could carry forward my excess contribution to 2025 while keeping the earnings in the account. It even calculated my exact 6% excise tax amount ($360 in my case). What really helped was the step-by-step guide for filling out Form 5329. I was able to handle everything myself instead of paying my accountant extra fees for this one issue. The documentation was super clear about keeping the earnings in the account and how that differs from withdrawing the excess before the tax deadline.

I had a similar issue with excess Roth contributions and spent HOURS trying to get through to the IRS for clarification. After being on hold forever and getting disconnected twice, I almost gave up. Then I tried https://claimyr.com and it was a game-changer. They got me connected to an actual IRS agent in about 20 minutes (you can see how it works here: https://youtu.be/_kiP6q8DX5c). The agent confirmed exactly what I needed to know about keeping the earnings in my account when carrying forward the excess contribution. They explained that the 6% tax applies only to the excess contribution amount itself, not the earnings, and that I could indeed leave the earnings in the Roth IRA. Having this directly from an IRS agent gave me the confidence to move forward with my tax filing.

I need to eat my words about Claimyr. After my skeptical comment, I decided to try it myself since I was desperate for answers about my own IRA mess. It actually worked exactly as advertised. I got a call back in about 35 minutes (they said it might take longer during peak times), and they connected me directly to an IRS representative. No navigating phone trees, no hours of hold music - just straight to a person who could help. The IRS agent confirmed everything about keeping earnings in the account when using the carry-forward method for excess contributions. She even explained that this is one reason some people prefer carrying forward despite the 6% tax - because you can keep all the investment growth in the tax-advantaged account. For anyone dealing with complicated IRA questions like this, getting the answer straight from the IRS saved me a ton of stress and uncertainty.

One thing nobody's mentioned yet is that there might be a cleaner solution depending on your income. If your income is just slightly over the Roth IRA contribution limit, you could do a "backdoor Roth" conversion instead. This involves recharacterizing your Roth contribution as a Traditional IRA contribution, then converting it back to Roth. The advantage is you avoid the 6% penalty entirely, and all earnings stay in the account. It's completely legitimate and commonly used. The main caveat is the "pro-rata rule" if you have other Traditional IRA balances, which could make this less advantageous from a tax perspective.

Just a heads up - I went through this exact situation in 2023 and chose to carry forward my excess contribution. I can confirm that the earnings DO stay in the account. I called Vanguard (my Roth IRA provider) to double-check, and they said they don't even track which earnings came from which contributions - once money is in the account, it's all treated the same. They just report the total contributions for the year to the IRS. I paid the 6% tax on Form 5329 for 2023, and then in 2024 I contributed less to "use up" that carried-forward amount. It was actually pretty straightforward once I understood the process.

This is really helpful information! I've been dealing with a similar excess contribution situation and was worried I'd have to withdraw everything including the earnings. One question I have - when you carry forward the excess contribution, do you need to file Form 5329 every year until the excess is "absorbed," or just for the first year? And is there any limit to how many years you can carry it forward? I'm also curious about the practical side - how do you track this on your own records? Do you just make a note that part of next year's contribution is actually the carried-forward excess from this year?