Correcting Traditional IRA contribution made by mistake
Hello,
Thank you for your time in advance.
Client contributed $6500 in a traditional IRA earlier this year, but is considering adding a SEP IRA for this year for bigger deduction.
Their AGI is above the phaseout level, so the traditional IRA will not be deductible any way.
I was thinking about following options and questions for each.
1. IF possible, take out the $6500 back within this year as if it didn’t happen. He’ll only get taxed in case only there’s a gain?
2. Report it as non-deductible IRA and convert it to a Roth. But would having a SEP IRA complicate this because of Pro-rate rule?’
Also, non-deductible IRA is not a separate registration type right? it’s just a traditional IRA not deducted on the tax form?
Thank you!!
Permalink Submitted by Alan - IRA critic on Thu, 2023-12-07 20:18
Permalink Submitted by William Tuttle on Fri, 2023-12-08 04:12
Permalink Submitted by Keith Kim on Fri, 2023-12-08 04:37
Thank you for great ideas. I’ll confirm their employees’ length of employment. by the way for Solo K to be adopted, they should have no eligible employees right? regardless of total number of employees Thank you.
Permalink Submitted by William Tuttle on Fri, 2023-12-08 13:29