douglas_c
Returning Member

Excess contribution to traditional IRA subsequently converted to Roth IRA - how to fix

For the tax year 2022 I made an excess contribution to a traditional IRA and used the entire amount for a backdoor Roth conversion. Now that I'm filling out my taxes I've discovered that the entire initial contribution was an excess contribution, and I'm having trouble determining how to fix it. to be specific these are the steps that I went through:

 

 08/05/22 - Contributed $7K to Roth IRA account. I had intended to contribute to my traditional IRA, but made selected the wrong account number.

08/11/22 - Immediately realized mistake and asked for it to be reversed but the financial institution didn't get to it for 6 days and therefore could only re-characterize the deposit into my traditional IRA account. The re-characterization of the contribution and earnings from Roth to traditional IRA resulted in a $7093 1099-R with box 7 code "N", and took the total balance of my traditional IRA from $0 to $7093.

11/09/22 - Requested an excess contribution distribution on $93 from the traditional IRA, resulting in a 1099-R for $93 with a box 7 code of 8.

12/22/22 - (Backdoor) converted the $7000 in the traditional IRA to a Roth IRA resulting in a 1099-R with a box 7 code of 2.

 

Now I'm trying to figure out how to fix the problem. I no longer have any funds in the traditional IRA so I'm assuming that I will need to withdraw the money from the Roth. When I contacted my financial institution they said that they could only do a "normal" distribution (not an excess distribution), but I'm assuming that I need a distribution with a box 7 code of "P" or possibly "PJ". Given this situation, here are my questions:

 

1) Is the financial institution really limited to doing a normal distribution, and if so is there a way to fill out my taxes so that the "normal" Roth distribution cancels out what is actually an excess contribution to my traditional IRA.

 

2) Should I have the original $7000 converted contribution removed, or the contribution plus earnings. What about if there's actually been a loss attributed to the conversion (this is the case).

 

3) How does this (large) mess get filed in TurboTax?  I'm particularly concerned about the method to show the excess 2022 traditional IRA contribution being cancelled with a 2023 1099-R for a normal distribution from a Roth IRA.

 

Note that I've read the posts I can find about excess contributions to a backdoor Roth (including How to fix an excess traditional IRA contribution that was later converted to a Roth. and Back Door Roth Excee contribution - how to withdraw? but although @macuser_22 and @DanaB27 gave great answers none of the answers seem to cover this particular situation.