Traditional IRA to Roth recharacterization limits and withdrawal

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@goyal_raj wrote:

Thanks.

Here is what i did Under Retirement and Investments:

Select the kind of IRA- i checked on Traditional IRA

Is this a repayment of a retirement distribution- No

Tell us how much you contributed for 2021, even if you later transferred some or all of  it to Roth - entered 6000

Tell us how much you transferred- how much did you switch or recharacterize to a Roth IRA- 6000

Your IRA Explanation statement- "not eligible for a traditional IRA'

Any excess contributions before 2021- No

Any non deductible contributions to Rajesh's IRA (traditional IRA from 2020 or prior years)- no (since I recharacterized them all)

Is this a repayment of a retirement distribution- No

It says "Your income is too high to contribute. It is an excess contribution".

 

My Vanguards statement also shows the following:

1. Gross Distribution- 6000

2a. Taxable amount- 6000

2b. Taxable amount not determined-(X)

7. Distribution code- 2

IRA/SEP/SIMPLE- (X)

 

What should I change?

Thanks

 

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You are mistaken on your original question.  High income and 401(k) does not prevent a Traditional IRA contribution but it can prevent the ability to *deduct* it.  It would just become an non-deductible Traditional IRA contribution but high income can make a Roth contribution not eligible at all - that is probably your problem.    You are not eligible to recharactorize to a Roth if you cannot contribute to a Roth at all because if high income.

If your income is too high for a Roth contribution and you do not want a non-deductible Traditional IRA contribution then your only choice to to request a "return of contribution" and any earnings from the IRA custodian.   This must be done before the due date of the tax return or extended due date if an extension is filed.

See these IRS articles for the deduction limits and Roth contribution limits.

See this IRS link for Traditional IRA deduction limits when covered by a retirement plan at work.

https://www.irs.gov/Retirement-Plans/IRA-Deduction-Limits

See this IRS article for Roth contribution limits:

https://www.irs.gov/retirement-plans/roth-iras

If you do not remove the excess that is now in the Roth, it will be subject to a yearly 6% penalty that will repeat each year that it remains in the Roth.