Dan, I read your reply related to conversions/recharacterizations of traditional IRAs to Roth IRAsseveral times but I am still a bit confused about how to apply this to my situation, which is as follows:
- I am retired, but I did earn a small amount of income this year (less than $5,000).
- Last year, I paid very little taxes, since I am living chiefly on social security until I can tap retirement savings at age 70.
- This year, I wanted to take advantage of a green energy tax credit, so I decided to get my tax burden up by withdrawing $20,000 from a traditional IRA before the end of 2024.. I took $10,000 of that amount in cash, then reinvested the remaining $10,000 into a Roth IRA.
So my question is: Is the $10,000 I invested into a Roth IRA considered a conversion, and therefore can exceed my earned income of less than $5,000? Turbotax is telling me that I have an excess contribution, and will pay a penalty. Must I change that contribution to the Roth IRA to approximately $5,000 if I want to avoid the penalty? If so, can I put the remaining amount back into the traditional IRA?
