dmertz
Level 15

Retirement tax questions

Yes, you can ask the IRA custodian to explicitly recharacterize the excess as a traditional IRA contribution and they will transfer the excess, adjusted for any investment gain or loss while in the Roth IRA, to a traditional IRA.  This causes the amount recharacterized to be treated as if it was originally made to the traditional IRA and had incurred the investment gain or loss in the traditional IRA.  TurboTax will automatically treat as a traditional IRA contribution whatever amount you indicate (the amount of the excess) that you switched to being a traditional IRA contribution.

 

The resulting traditional IRA contribution will be deductible or nondeductible depending on your filing status, modified AGI for the purpose of a deduction for a traditional IRA contribution, and whether or not you were covered by a workplace retirement plan for 2019 (indicated by the mark in box 13 Retirement plan on your W-2).  TurboTax will automatically prepare Form 8606 to report a nondeductible traditional IRA contribution or include a deductible contribution on Schedule 1 line 19.

 

Your other option to avoid an excess-contribution penalty is to obtain a return of excess contribution from the Roth IRA, with the distribution including any investment gain or loss attributable to the excess contribution.  Any investment gain will be subject to income tax and, if you are under age 59½, to a 10% early-distribution penalty.