• The IRS is selective about what types of income qualify for IRA savings.business charts with us money image by Andrew Brown from Fotolia.com
  
  

Contributions Cannot Exceed Earned Income

• Internal Revenue Service rules very clearly state that Roth individual retirement account (IRA) contributions cannot exceed your earned income. If at the end of the year, you find that you've contributed too much and withdraw the contributions, plus earnings, before their filing deadline (including extensions), you won't owe a penalty. If you wait until after the deadline, you are subject to a 6 percent penalty on the money.
  
  

Spousal IRAs Are an Exception

• If you are a non-earning spouse who files jointly with your partner, you may make a full Roth IRA contribution as long as your combined income is enough to cover your combined IRA contributions. This is the sole exception to the IRS's earned-income rule.
  
  

Bottom Line

• You benefit by withdrawing excess Roth IRA contributions, plus any earnings those contributions made, before your filing deadline to avoid the 6 percent penalty mandated by the IRS. However, if you are a spouse who earned less than the amount of your contribution, your are probably fine as long as your joint income is large enough.