Can you transfer an ineligible ROTH IRA to nondeductible IRA?
A client contributed the max amount to a ROTH IRA for 5 consecutive years, only to discover that she was ineligible due to her filing status (MFS) and income limitation. Questions — can she transfer the Roth IRA (contributions & earnings) to a nondeductible IRA? Is she still subject to the 6% penalty?
Permalink Submitted by Alan - IRA critic on Thu, 2018-01-18 22:58
Unfortunately, no. These are excess Roth contributions, and only the 2017 contribution is still within the deadline for recharacterization or withdrawal before the due date. Prior years have incurred the accumulated 6% excise taxes which must be reported on Form 5329 for each year. Or client could amend the 2014-2016 returns to joint returns as eliminating the excess that way might save money given the added penalties for the excess Roth contributions.