Yes, @Opus 17 I think I understand what you're saying. Let me try to restate what you said just to make sure:
For 2024, I contributed directly $7000 to a Roth IRA, then recharacterized that amount to a Traditional IRA, and then converted that amount to Roth IRA. The excess $1000 which I then contributed later accidentally, was contributed directly to a Traditional IRA, then converted to a Roth IRA. So $8000 total to IRAs, which I pay the 6% penalty on the excess $1000.
For 2025, I already contributed directly $7000 to a Traditional IRA and then converted to a Roth IRA. And because I can't do anything with this either because I hit the max, I can either withdraw $1000 from my Roth and take a 10% penalty or I can carry the 6% excess penalty again for this year.
For 2026, I plan to do backdoor Roth IRA contributions as well since my income likely will not drop below the maximum allowable amount. However, since I am doing the backdoor Roth conversion, even if I were to contribute $6000 (instead of the max of $7000) to my Traditional IRA and convert it to my Roth, it would not count because as you said "the unused limit will not flow to the Roth IRA section of form 5329." Meaning I'd still be paying the excess 6%.
So in essence, I am better off just withdrawing $1000 from my Roth sometime in 2025 and taking the 10% early withdrawal penalty since my income will remain too high to directly contribute to my Roth in the near future and would be taking a 6% penalty every year instead.
Did I understand all of this correctly?
