Recontributing a withdrawal to an IRA

erica-eynon8 · ‎December 26, 2021

Hi,

I have a bit of a complex situation. I have two IRAs - a traditional and a roth. I cannot contribute directly to the roth as I exceed the income limits. So I contribute my $6000 max to the traditional and then I do a conversion to the Roth, i.e. the back-door method.

In September I made a mistake and accidentally contributed $1000 directly to the Roth. When I realized this I did a return of excess contribution with my financial institution (T. Rowe). I got the money back but took a bit of a loss. I got about ~$980.

So since in my view I should still have $1000 to contribute (I contributed $6000 and returned $1000). Is this allowed? I tried to do this on T.Rowe but they website will not allow me to initiate a transition because they're saying I hit my contribution limit. They don't appear to be recognizing I did an excess contribution return.

TIA for any advice.

fanfare · ‎December 26, 2021

Arithmetic will handle your situation.

1,000 + 6,000 - 1,000 = 6,000

You are at your limit, unless you are 50 years old or older

Sheesh.

erica-eynon8 · ‎December 27, 2021

That's not what I'm saying.

I contributed $6000 total, broken down like this

$5000 correctly to the Traditional

$1000 incorrectly to the roth. ANYTHING I contribute directly to the roth is excess.

I removed the excess contribution to the roth. So since the removal of the excess is supposed to make like the contribution never happened, I would think I still have $1000 left that I can contribute to the traditional. However T.Rowe isn't letting me.

Critter-3 · ‎December 27, 2021

Talk to the broker ... they may need to do an override on their side.

fanfare · ‎December 27, 2021

talk to T Rowe they should be able to straighten their records. Tell T. Rowe you are transferring the money elsewhere.
You should be able make a contribution in excess, regardless of what the custodian says. You know it is not an excess contribution.
make the contribution with some other custodian, like a self-directed Roth brokerage account, which is where your Roth money should be. To have an IRA brokerage account at T. Rowe they charge you $20 a year (last I checked). Others charge zero.

Once many years ago my sister had a tax-deferred issue with T. Rowe. After talking to a supervisor, they agreed to modify their records, even though it was not strictly permissible. So that worked out. For some reason the supervisor was in a good mood.

Note: the withdrawal of excess ($1,000 exactly) will appear on your 1040 distributions line 4a, along with the amount converted.

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Recontributing a withdrawal to an IRA

Retirement tax questions

Retirement tax questions

Retirement tax questions

Retirement tax questions