@Wonderer1 wrote:
@macuser_22
"Either way both the contribution or any earnings must be returned or recharacterized." I agree with this. But recharacterization needs to be done for the full amount correct ? I cannot do it only for the excess and its gain. The point is I want the full $6k in the Roth with the least amount of tax. All this could have been avoided with a back door. Thanks.
A recharacterization simply treats the contribution as if it never happened in the Roth and it was to the Traditional IRA instead. What ever was contributed to the Roth and earnings are simply treated as a Traditional IRA contribution by the financial institution. That is usually simpler than having the contribution and earnings returned to you and then you use the make a new contribution. Of course if you do a backdoor Roth and earnings will be taxable, but the earnings are taxable if returned to you anyway.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
