@glossingers wrote:
I contributed $6,000 to my traditional IRA in March 2021 then mistakenly told Fidelity to re-characterize the full contribution to my Roth IRA. Which they did including ~$200 of gains. I exceed the income limit to contribute to a Roth though. I spoke to Fidelity who said I would have to recharacterize it back to a traditional IRA. I would prefer to just report the $6,200 on my taxes as a conversion and pay the applicable taxes.
You can't treat it as a conversion if you told them to recharacterize it. And if you did a conversion now, it would be for 2022, because conversions can't be back-dated.
I believe you do need to re-re-characterize the Roth contribution as a non-deductible contribution to a traditional IRA. I believe this can be done before April 15, 2022, and you would report a non-deductible I traditional IRA contribution on your 2021 tax return with form 8606.
Then sometime in 2022, you can convert the entire traditional IRA balance to a Roth and pay the tax on the deductible portion of the conversion, and that would be reported on your 2022 tax return.
As an alternative, you can do the transaction in two separate steps that will have the same net result.
1. Withdraw the $6200 from the Roth IRA as a "withdrawal of excess contributions." You will also have to withdraw the earnings, if any, from that $6200. You must do this before April 15.
2. Make a new non-deductible contribution of $6000 to the IRA, before April 15, applied to the 2021 tax year.
What then happens on your 2021 tax return is you only report the new $6000 non-deductible IRA contribution. The IRA-Roth-withdrawal technically never happened, so that get's ignored by your tax return. If you had earnings on the $6200 in the Roth, you will get a 1099-R next year and it will be taxable plus a 10% penalty for early withdrawal. And then you can still convert the traditional IRA to a Roth in 2022 and pay the pro-rata income tax on the deductible portion.
@dmertz Can you confirm or correct?
