How to Protect IRAs From Excise Taxes and PenaltiesHow to Protect IRAs From Excise Taxes and Penalties

Individual retirement account excise taxes and penalties range from 6% to 25% and can eat into or even completely erode an IRA’s accrued earnings. But an IRA-savvy advisor can help avoid these excise taxes by working with IRA owners to take preventive measures, take advantage of exceptions and make timely corrections.

The protection and correction strategies for IRAs are usually most effective when planning in advance and educating clients about the rules. Let’s focus on the 6% excise tax on uncorrected excess IRA contributions, the 10% additional tax on premature distributions, the 25% excise tax on excess accumulation of required minimum distributions (RMDs) and protection strategies for these taxes.

Six Percent Excise Tax 

There are limi...