Accidental Roth Contribution

Hello-

Client accidentally just made a Roth contribution for 2022 (income too high). The money was not invested. They are wanting to make a non-deductible IRA contribution for 2022 instead.

I believe they can recharacterize to the Traditional IRA but can they instead just withdraw the Roth money and then set up the Traditional IRA and contribute?

Do they have to wait until the Roth money is withdrawn to make the Traditional IRA contribution? Or do they just have to make sure both actions (withdraw from Roth and add to Traditional IRA) are done by April 18th but sequence does not matter?

Thank you!



They can do either. If they withdraw the contribution it would have to be done correctly by requesting that the specific 2022 Roth contribution be removed. The custodian would have to calculate any gain or loss on that contribution, no matter how small. The TIRA contribution can be made before the Roth contribution is removed, but some custodians will not accept that contribution as a policy to avoid excess contributions. Tax reporting work is about the same for recharacterizations or removal of excess. Recharacterization is more efficient since there is only one transaction needed. The 2022 return should reflect the final result and include an explanatory statement if not yet filed.



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