Wondering: How exactly does the IRS track Roth IRA over-contributions when using multiple brokers?

The IRS has a pretty robust system for tracking retirement contributions, even across multiple brokers. All financial institutions are required to file Form 5498 with the IRS for each account holder who made IRA contributions. This form reports your total contributions for the year, and the IRS can aggregate these across different institutions. So in Maria's case, the IRS would receive a Form 5498 from Fidelity showing $3,800 in contributions and another from Vanguard showing $3,100. Their systems would flag that the combined $6,900 exceeds the $6,500 limit. If Maria discovers she over-contributed, she should remove the excess contribution (plus any earnings on that excess amount) before the tax filing deadline (including extensions). This is called an "excess contribution withdrawal." She would need to contact one of her brokers and specifically request this type of withdrawal. The earnings portion would be taxable for the year the contribution was made, and if she's under 59½, those earnings might also face a 10% early withdrawal penalty. If she doesn't remove the excess before the deadline, she'll face a 6% excise tax on the excess amount every year until it's corrected.

After dealing with my own Roth IRA mess last year, I found this amazing tool called taxr.ai (https://taxr.ai) that saved me so much stress. I accidentally over-contributed to my Roth IRAs across three different brokers and was panicking about penalties. The tool analyzed all my contribution records and tax documents and showed me exactly how much I needed to withdraw from which account to fix the problem. It even helped me calculate the earnings on the excess contribution that also needed to be withdrawn (something I had no idea how to figure out on my own). The step-by-step guidance made the whole process way less intimidating than it seemed at first.

Just wanted to update after trying taxr.ai for my Roth IRA over-contribution situation. I was honestly amazed at how helpful it was! The document analysis picked up contribution dates from my statements that I hadn't even noticed were important. It identified that I had over-contributed by $570 across my two Roth accounts, and calculated that I needed to withdraw about $612 (including the earnings portion). The step-by-step instructions for contacting my broker were super clear, and I was able to get everything fixed before the deadline. Definitely saved me from that ongoing 6% penalty!

I had a similar overcontribution issue that I didn't catch for 2 years. Spent 3 WEEKS trying to reach the IRS for guidance on how to fix it without making things worse. Constantly on hold, disconnected calls, couldn't get through. Finally used this service called Claimyr (https://claimyr.com) that got me connected to an actual IRS agent in about 20 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The agent walked me through exactly how to handle my specific situation with Form 5329 for the prior years and calculating the penalties owed. Also confirmed I was eligible for a waiver of some penalties due to my circumstances. Seriously saved me from making things worse by trying to fix it incorrectly.

I need to apologize for my skepticism about Claimyr in my earlier comment. After another failed attempt to reach the IRS myself about my Roth overcontribution problem, I decided to try it. The service actually worked exactly as described. It took about 45 minutes (longer than the 20 minutes mentioned, but still WAY faster than my previous attempts), and I got a call back when an actual IRS agent was on the line. The agent helped me understand exactly how to handle my excess contributions from 2023 and 2024, including which forms I needed and how to document everything properly. For anyone dealing with Roth IRA contribution issues across multiple accounts, being able to actually speak with someone at the IRS made all the difference. They confirmed I could still use the removal of excess contribution method even though I was past the first deadline.

Another way to avoid this problem entirely is to just consolidate your Roth IRAs into a single account. I used to have IRAs scattered across 3 brokerages and it was a nightmare to track. Consolidating them made everything so much simpler - one statement, one place to check contribution limits, and no risk of accidentally overcontributing. The transfer process between brokers is pretty straightforward too. Most brokers will help you complete the paperwork to transfer funds directly without triggering any tax consequences.

I just want to point out that the 5498 forms mentioned above aren't available until May of the following year, which is often AFTER you've already filed your taxes. So relying on those forms to catch over-contributions doesn't always work if you file early. I learned this the hard way! The best approach is to track your own contributions throughout the year rather than waiting for the brokerages or IRS to catch it. I use a simple spreadsheet that adds up my contributions across different accounts.

Great discussion here! I've been managing multiple Roth IRAs for years and learned some of these lessons the hard way. One additional tip I'd add is to set up automatic contribution limits within each brokerage account if they offer that feature. For example, if you know you want to split your $6,500 annual limit between two accounts, you can often set up automatic investments that will stop once you hit your predetermined amount for each account (like $3,250 each). This prevents the accidental over-contribution scenario that Maria faced. Also, keep in mind that if your income changes during the year and you become ineligible for Roth contributions due to income limits, that's another way to accidentally over-contribute even if you're tracking the dollar amounts correctly. The income limits for 2025 phase out between $146,000-$161,000 for single filers, so it's worth double-checking your projected income if you're anywhere near those thresholds.

This has been such an informative thread! As someone who just opened my second Roth IRA account at a different brokerage, I was completely unaware of how easy it would be to accidentally over-contribute. The point about Form 5498 not being available until May is particularly eye-opening - I always file my taxes in February, so I would have never caught an over-contribution through those forms. I'm definitely going to set up that contribution limit tracking that was mentioned. It's reassuring to know that the major brokerages have built-in features to help prevent this issue. I think I'll also start using a simple tracking spreadsheet as a backup, just to be extra safe. One question I have: if someone realizes they over-contributed but it's a relatively small amount (like $50-100), is it still worth going through the hassle of the excess contribution withdrawal? Or would it sometimes make more sense to just pay the 6% penalty, especially if the withdrawal process is complicated?