Change Non deductible to deductible IRA
We accidently made a nondeductible contribution to our traditional IRA and want to change it to being deductible. How is this done?
We accidently made a nondeductible contribution to our traditional IRA and want to change it to being deductible. How is this done?
Permalink Submitted by Alan - IRA critic on Tue, 2022-11-15 23:02
The deduction status was not determined when the contribution was made, and the IRA custodian neither knows or cares how the contribution is treated. If you qualify for the deduction, just report it as such on your 1040 and do not file Form 8606 reporting the contribution as non deductible. If this is for a prior year, you will have to amend the return for that year accordingly.
Permalink Submitted by John Shepherd on Tue, 2022-11-15 23:58
This was done with Merrill Lynch this year 2022. They have a selection of deductible or non deductible when contributing to a traditional IRA. Our contribution reads as ( Current Year Contribution 2022 NONDEDUCT CONTRIB AS OF 09/01/2022 )
Permalink Submitted by Alan - IRA critic on Wed, 2022-11-16 01:11
Strange. They would not do anything different regardless of what you indicate because they do not know whether you can deduct the contribution or not. They issue a 5498 reporting the type of contribution (TIRA or Roth), but do not specify anything relative to the deduction. Perhaps this box is meant to make you think about whether you qualify for a deduction, and if you find out your income is too high for the deduction, you might not make the contribution. That eliminates the chance that you would ask for the contribution to be returned to you with an earnings determination, which is an expense for them. Therefore, if you qualify for the deduction, just deduct it on your return. The fact that you showed it as non deductible does not mean that you cannot just deduct it, so there should be no need to contact ML about this. Evidently you plan to deduct it, but if you find that you cannot due to income and participation in a workplace plan, your choices are to report it as non deductible on Form 8606, perhaps converting it to Roth if you have no pre tax IRA balances, or having it returned to you.