I found out my 2022 contribution to Roth IRA was excess contribution due to a sale of rental property that generated large capital gains. I spoke to my plan administrator about re-characterizing the contribution as traditional IRA contribution. However, because this contribution is after tax money (TurboTax tells me I'm eligible to make this contribution to traditional IRA but not tax deductible) while the rest of my current (Roll-over) IRA is pre-tax money, this will complicate things down the road when I start taking distributions. I looked into applying the contribution to 2023 Roth but it looks like I would still pay the penalty and if I don't have earned income in 2023, I would not be eligible to make Roth contribution at all. So my best option seems to be withdrawing the entire amount of contribution and pay tax on the earnings, if any. Am I correct? If I choose this option, how do I handle it on my 2022 tax return? Do I show no contribution at all for 2022? I don't see an option for entering the contribution and then withdrawing it (only option is to re-characterize it). Additionally, shall I be getting a corrected Form 5498 plus a 1099-R from my plan administrator?
Thank you!
