dmertz
Level 15

Retirement tax questions

The $2,280 is not an excess contribution subject to penalty that can be treated as part of your 2021 IRA contribution.  It's simply a nondeductible traditional IRA contribution that must be reported on Form 8606.

 

If you are filing Single, you could recharacterize The $2,280 to be a Roth IRA contribution instead.  If you file with any other filing status, you may or may not be able to recharacterize this contribution since your MAGI for the purpose of being eligible to make a Roth IRA contribution might be above the limit for your filing status.

 

To be able to use the $2,280 as part of your 2021 contribution, you would have to obtain an explicit return of contribution of the $2,280, with the amount distributed required to be adjusted for any investment gain or loss while in the traditional IRA.  Any gain required to be included in this distribution is then subject to income tax and, if you are under age 59½ at the time of this distribution, to a 10% early-distribution penalty.  You could then use this returned money to fund your 2021 contribution.

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