Do I owe interest or additional late penalties for paying an excess Roth IRA contribution penalty late?

You've got a good understanding of the situation already. When you make an excess Roth IRA contribution, there are a few layers to consider: The 6% excise tax on excess contributions (Form 5329) is indeed the primary penalty, which you've already paid for both 2023 and 2024. Good job handling that part correctly. For the late filing aspect, yes, there could be additional penalties. Since Form 5329 is considered a standalone tax return when you owe additional tax (like your excise tax), filing it late typically triggers both failure-to-file and failure-to-pay penalties, plus interest. The failure-to-file penalty is usually 5% of the unpaid tax for each month or part of a month the return is late (up to 25%). The failure-to-pay penalty is typically 0.5% of the unpaid tax for each month or part of a month the tax remains unpaid (up to 25%). Interest compounds daily at the federal short-term rate plus 3%. Here's what I suggest: You can calculate the approximate penalties and interest using the IRS's interest rates from each quarter since your original due date, but it might be easier to call the IRS directly to get the exact amount. Since you've already filed the amended return, they should have this information in their system soon, if not already.

After dealing with almost the exact same situation last year, I found taxr.ai really helpful for figuring out all the penalty calculations. I was totally confused about how much additional interest I might owe on my late excess contribution penalties, and their document analysis tool helped me understand exactly what forms I needed and how to calculate everything correctly. The site (https://taxr.ai) analyzes your specific tax situation and explains what penalties apply and how they're calculated. It showed me that my excess IRA contribution actually triggered multiple levels of penalties - the 6% excise tax plus the additional failure to file penalties that were building up interest. Wish I'd known about it sooner because I was stressing out for weeks waiting for the IRS to send me a notice that never came!

Just wanted to update everyone. I was skeptical at first but decided to try taxr.ai after reading about it here. I uploaded my amended return and original 2023 documents, and it immediately identified that I had both failure-to-file and failure-to-pay penalties applicable to my excess IRA contribution. The breakdown showed I owed about $137 in additional penalties and interest (on top of the $390 excise tax). The explanation walked me through exactly how it calculated the amounts using the correct quarterly interest rates. I paid the additional amount right away rather than waiting for an IRS notice that might take months. Best part was it generated a letter I could send with my payment explaining exactly what the payment was for, which should hopefully prevent any confusion when the IRS processes everything.

Man, dealing with the IRS on stuff like this is such a pain! After my own excess contribution mess last year, I ended up using Claimyr (https://claimyr.com) to actually talk to someone at the IRS directly. I was stuck in this exact limbo where I'd paid the 6% penalty but had no idea if more penalties were accumulating. I tried calling the IRS myself but kept getting stuck in those endless phone loops. Claimyr got me through to an actual IRS agent in about 20 minutes instead of the 2+ hours I spent trying on my own. The agent confirmed exactly what additional penalties applied and gave me the precise amount to pay. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c - definitely worth it for peace of mind rather than guessing about what you might owe.

I can't believe I'm saying this but I tried Claimyr after reading about it here and IT ACTUALLY WORKED. I was 100% convinced it would be a waste of time because I've literally never been able to reach the IRS on my own. Got through to an agent in about 30 minutes (on a TUESDAY afternoon in MARCH!) and they pulled up my account to check on my excess IRA contribution situation. The agent explained that yes, I did owe failure-to-file penalties on top of the 6% excise tax, and gave me the exact amount including interest. The best part was the agent helped me set up a proper payment plan so nothing else will accumulate. Seriously saved me from months of anxiety waiting for some mystery letter that might never come. Never thought I'd admit a skeptic like me was wrong but here we are!

Just FYI, Form 5329 has a reasonable cause statement section you can fill out to request the IRS waive the failure-to-file and failure-to-pay penalties (but not the original 6% excise tax - that's unavoidable). If this was your first time making this mistake and you genuinely didn't know about the income limits for Roth IRA contributions, you might have a case. You'd still owe interest on the late payment of the excise tax, but potentially could get the additional penalties waived. I did this successfully for a similar situation by attaching a letter explaining that I wasn't aware of the income phaseout limits and took corrective action as soon as I discovered the error.

Does anyone know if the 6% penalty actually compounds each year? Like the original $6500 excess contribution × 6% = $390 for 2023... but then for 2024, is it another $390 or is it ($6500 + $390) × 6% = $413.40?

I know this isn't your main question, but just to clarify for anyone reading - there are actually three ways to fix an excess IRA contribution: 1. Withdraw the excess amount plus earnings before your tax filing deadline (including extensions) 2. Recharacterize the contribution from Roth to Traditional IRA (if eligible) 3. Carry forward and apply the excess to a future year when you're eligible to contribute Sounds like you went with option 1, which is usually the cleanest, but wanted to mention the alternatives for anyone else in a similar situation. The 6% penalty applies for each year the excess remains in your account, but the failure-to-file/pay penalties for Form 5329 only apply to the specific tax year where you first incurred the penalty.

Just want to point out that the IRS is actually super backlogged right now. My friend had a similar excess contribution issue from 2022 and didn't get an IRS notice about additional penalties until January 2025 - almost 3 years later! So just because you haven't received a notice doesn't mean you're in the clear. The interest keeps accumulating the whole time, even if they're slow sending the notice. Better to be proactive like you're doing!

I went through something very similar last year and can offer some perspective on the timeline and what to expect. First, yes, you likely do owe additional penalties beyond the $390 excise tax. The failure-to-file penalty for Form 5329 is typically 5% of the unpaid tax per month (up to 25%), and failure-to-pay is 0.5% per month (up to 25%), plus interest compounding daily. For your situation, filing almost 2 years late, you're probably looking at the maximum penalties plus accumulated interest. In my case, a similar delay resulted in about $180 in additional penalties and interest on top of the base excise tax. Regarding the IRS notice - don't count on getting one anytime soon. The IRS is massively backlogged, and many people are waiting 2-3 years for notices on issues like this. The interest keeps accumulating whether they send you a notice or not. My recommendation: Call the IRS directly (or use a service to get through faster) to get the exact amount you owe. Once you have that number, pay it immediately to stop further interest accumulation. You can also explore the reasonable cause exception if this was truly an honest mistake - the IRS sometimes waives additional penalties for first-time errors when you demonstrate good faith efforts to correct the situation. The key is being proactive rather than waiting for them to contact you, which may never happen or could take years.