Doing our taxes now, we realize we make too much to contribute to a Roth IRA. I've always used backdoor conversions, but my wife made Roth contributions last year, and so it was excess.
Vanguard recommended this magic trick:
1) Recharacterize to a Traditional IRA. The IRS will view it as though it was originally Traditional to begin with. I'll file Form 5329 since this is reportable.
2) The benefit of this, over withdrawing the excess, is that there is no early withdrawal 10% penalty.
3) Now, Convert the funds to Roth. Yes, I'll pay taxes on the earnings upon converting to roth, but I would have paid taxes on them had I withdrawn the excess funds. File from 8606.
Thoughts?
