IRA contribution removal
We have a client who recently made an IRA contribution. It was made April 2015 as a 2014 contribution. We understood this to be a pre-tax contribution, but last minute the accountant said it would not be considered pre-tax. So now that we crossed April 15th (or does that matter?), what are our options for that 2014 IRA contribution?
He may not have the ability to make a 2015 pre-tax contribution, so trying to move it into 2015 could be problematic. He does have an existing Roth IRA without any recent contributions for 2014 or 2015.
Thank you for any help you can provide.
Permalink Submitted by Alan - IRA critic on Fri, 2015-04-17 16:00
He has the options of removing it with any earnings and paying tax and penalty on the earnings, or if his income is not too high for a Roth contribution, he can recharacterize it as a Roth contribution without removing it. If he does nothing it remains a non deductible TIRA contribution, and he could convert it to a Roth but due to his existing pre tax IRA balance, that conversion would be mostly taxable. The deadline for removal or recharactering is 10/15/2015.