FinCEN Proposing a No-Action Letter Process
New Proposed PFIC Regs Issued by IRS

IRA Overcontribution Excise Tax Update

By Janet Hagy, CPA-Austin

The recent tax court case, Couturier v. Commissioner (T.C. Memo, 2022-69), is a timely reminder that excise tax can be retroactively imposed on otherwise closed years. In this case, the taxpayer was determined to have significantly overcontributed to his IRA in 2004. In 2016, the IRS imposed excise tax, penalties and interest on the 2004 overcontribution. The taxpayer tried to argue that the three- and six-year statute of limitations period had expired. The court ruled that, “This excise tax continues to apply to future tax years, until such time as the original excess contribution is distributed to the taxpayer and included in income, under Sec. 4973(b)(2).

This case is an extreme example of the problem of overcontribution to an IRA, HSA, Coverdell Education Savings or MSA, and the excise taxes that can be assessed. But it also highlights that the IRS’ scrutiny of related prior-year transactions in a future period can result in unfortunate consequences. To start the statute of limitations period, taxpayers should be advised to remove excess contributions and earnings on such excess as soon as possible, and to report any excise tax incurred.

Tax Court in Brief | Couturier v. Commissioner | Taxation of Excess Contributions from IRA - Freeman Law


Verify your Comment

Previewing your Comment

This is only a preview. Your comment has not yet been posted.

Your comment could not be posted. Error type:
Your comment has been saved. Comments are moderated and will not appear until approved by the author. Post another comment

The letters and numbers you entered did not match the image. Please try again.

As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.

Having trouble reading this image? View an alternate.


Post a comment

Comments are moderated, and will not appear until the author has approved them.

Your Information

(Name is required. Email address will not be displayed with the comment.)