You cannot recharacterize a contribution after the due date. Therefore, you cannot move the funds to a traditional IRA via recharacterization. To avoid the 6% penalty in future years you will have to remove the excess contribution. You then can make a new Traditional IRA contribution for 2024 or 2025.
You will have to pay the 6% on your 2024 tax return since cannot apply the excess contribution as a 2024 contribution and didn't remove the excess by December 31, 2024.
To remove the excess contribution you will take a regular distribution of $5,777.66 (without earnings) since it is after the due date of the 2023 return. You will get a 2025 Form 1099-R with code J (if you are under 59 1/2) and this will be entered next year on your 2025 return and resolve the excess contribution:
- Click on "Search" on the top and type “1099-R”
- Click on “Jump to 1099-R” and enter all your 1099-Rs
- Click "Continue" on the "Review your 1099-R info" screen
- Answer all the questions and make sure you enter the net contributions prior to 2024 on the "Enter Prior Year Roth IRA Contributions" screen (include the excess contribution here)
- On the "Do you have any Excess Roth Contributions" answer "Yes"
- On the "Enter Excess Contributions" screen enter the total excess contribution from 2023.
No, you do not have to pay the 10% early withdrawal penalty since you can withdraw contributions you made to your Roth IRA anytime, tax- and penalty-free.
[Edited 4/2/2025 | 5:51 am PST]
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