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Correcting An IRA Contribution

I made a $6500 contribution to my Roth IRA for 2023 in February 2023. I determined that I was ineligible to make a Roth contribution because my income was too high. In November 2023 I withdrew the contribution and income as an excess contribution which I planned to contribute as a non-deductible contribution to my traditional IRA. My custodian is treating the withdrawal as an early non-taxable distribution so my contribution is still in the Roth IRA. I recharacterized the $6500 Roth contribution and income to my traditional IRA. Can I now put the early distribution back into the Roth IRA even though I have already contributed the maximum amount? Will it be taxable as a late rollover even though it's a non-taxable distribution?

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1 Reply
DanaB27
Employee Tax Expert

Correcting An IRA Contribution

Can you clarify your question? You requested the withdrawal of the 2023 excess Roth IRA contribution in 2023 and therefore received a 2023 Form 1099-R with code 8J?

 

You state that you that recharacterized the $6500 Roth contribution and income to my traditional IRA. Did you request that with your financial institution? For what year was this contribution made for? Did you receive a Form 1099-R for this recharacterization?

 

If you have funds in the traditional IRA, then you can make a conversion, which means move it from traditional to Roth IRA. This would not be a new contribution. Generally, conversions are taxable unless you had a basis in the traditional IRA ( made nondeductible contributions). If you had any pre-tax funds and a basis in the your traditional IRA then pro-rata rule applies. This means that with each distribution/ conversion you will have a taxable and nontaxable part.  If you decide to make a conversion then this will be entered on your 2024 tax return since you are converting the funds in 2024.

 

Please see How do I enter a backdoor Roth IRA conversion? and How do I re-characterize a Roth IRA contribution as a traditional IRA contribution in TurboTax? for additional information.

 

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