Roth IRA Excess for 2023
Client made Roth contribution in 2023 for full amount $6,500. His MAGI will only allow approx $3,000 to stay in Roth as a 2023 contribution. he has already made his 2024 Roth IRA contribution and very confident 2024 MAGI will allow full contribution for 2024.
His options are to remove excess ($3,500 plus earnings on this amount which is approx $1,000) or recharacterize the Roth excess portion to a Trad IRA and immediate convert to Roth which is plan.
My question pertains to the earnings on the excess of $1,000. I assume client has to claim earnings on 2023 return either way or does a recharacterization from Roth to Trad allow earnings to stay then pay tax on conversion (ie:$1,000) to avoid the 10% penalty on earnings or am I missing something? Trying to avoid claiming earnings and/or paying a 10% penalty on earnings if recharacterization prevents this.
Permalink Submitted by William Tuttle on Tue, 2024-02-06 20:48