ROTH Conversion and Excess Contribution

Submitted by Jerry Matecun on Tue, 2023-11-21 21:39

Let’s say one has an RMD due for 2023 of 10,000. They receive distributions of $9,900, then in early November they inadvertently make a ROTH conversion of 5,000. Is the excess contribution $100 or is it $5,000? In other words, is $4,900 of the conversion legit and they need to put back the other $100?



Submitted by David Mertz on Wed, 2023-11-22 00:01

  • The excess contribution to the Roth IRA is $100 unless the $100 can be treated as a regular Roth IRA contribution.
  • Because the $100 was RMD and not eligible for conversion, that $100 deposited into the Roth IRA must be treated as a regular Roth IRA contribution which must be corrected by obtaining a return of the $100 contribution if the individual is not eligible to make a $100 for the year in which the deposit into the Roth IRA was made.  Regarding the conversion, the individual’s Form 8606 Part II will report a $4,900 conversion despite the Form 5498 reporting a $5,000 conversion contribution.  If a return of contribution is obtained, it is not permitted to be put back into the traditional IRA; it is a required distribution.

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