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I accidentally over contributed $25 to my traditional IRA last year giving a total non-deductible contribution of $5025. This was then converted along with all my traditional IRAs into Roth IRAs in 2010.

Now shall I recharacterize $25 from Roth to Traditional IRA and then do removal of excess distribution of $25 from my traditional IRA? Is this worth all the hassle? Will the IRS care about such a paltry sum? What are the penalties and fines for just leaving it be? The complication to taxes hardly seems worth the effort of this inadvertent error.

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  • Oh they care. It is their job to care.
    – MrChrister
    Feb 2, 2011 at 4:32

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There is a penalty for the excess deposit, 6% per year until it's removed. I agree, it seems small, but send in the form, take care of it, and put it behind you. Easy enough.

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