Return of Excess/Recharacterization
Hello, if a client over contributed by $6K and they would like to remove $2k as a return of excess and then recharacterize the remaining $4k. Do see any issue with this?
Thank you.
Hello, if a client over contributed by $6K and they would like to remove $2k as a return of excess and then recharacterize the remaining $4k. Do see any issue with this?
Thank you.
Permalink Submitted by Alan - IRA critic on Thu, 2025-04-03 16:37
It’s not a problem with a competent custodian. Both transactions require the custodian to determine the gain or loss on the contribution and distribute or transfer the net amount.
If there are gains on the distributed excess, those gains will be taxable in the year in which the contribution was made. The 2024 return will also be affected since the 4k will either be deductible or more likely reported as a ND TIRA contribution for 2024.
If filed, the 2024 return will have to be amended. If not filed, time is very short to get these transactions done in time to include on the return, and an extension may be needed.
Note that both transactions have a deadline of 10/15/2025, but ONLY if the 2024 return or an extension is filed by 4/15.