@curlytwotoes wrote:
@Opus 17 & @fanfare To clear up any confusion, here's exactly what I did:
In 2024, I contributed $7000 to a Roth IRA, then recharacterized that amount to a Traditional IRA (because my income was too high), then converted it to a Roth IRA again to carry out the backdoor Roth IRA.
If the $7000 Roth and $1000 trad IRA contributions were both involved in this weird conversion dance, then we are back where we started. You have an excess $1000 contribution for 2024 that must be reported on form 5329, and the 6% penalty paid (amended 2024 return). Then, at some point during 2025, take a regular withdrawal of $1000 (no need to account for earnings) from the Roth IRA. This will go on form 5329 on your 2025 return and zero out the carryover excess from 2024.
The $1000 Roth withdrawal will not be subject to income tax on your 2025 return, but it could be subject to a 10% penalty for early withdrawal. It will not be subject to the 10% penalty if you can meet one of three conditions.
a) at some point in the past, you made at least $1000 of direct contributions (not conversions or backdoor conversions) to any Roth IRA account you own, and have not previously withdrawn it, or
b) if your only Roth money comes from conversions, you won't be subject to the 10% penalty as long as at least one of the conversions happened in 2021 or earlier, or
c) you are age 59-1/2 or older.
But unfortunately, if your only Roth money comes from conversions and you did not open your Roth until 2022 or after, then your $1000 withdrawal will fail the 5 year clock on conversions and be subject to the 10% penalty for early withdrawal.
