Excess contribution to ROTH IRA for 2022. What do I need to do now to avoid penalty? Withdraw vs Recharacteritzation?

[camvan]

What should I do now before filing my tax return for 2022?

I have contributed 7000$ in 2022 into Roth IRA.

Can you advise me what to do now to avoid tax penalty?

I invested in stock for the Roth IRA.

Do I have to sell the stock?

Can I change the Roth IRA to traditional IRA and not owing penalty?

Please help QUICK.  Want to file my tax return by tomorrow 4/18

[DanaB27]

Yes, you can recharacterize your Roth IRA contribution as a traditional IRA contribution as long as you have taxable compensation to make IRA contributions. Then you won't have to pay the 6% penalty.

It seems in your situation a recharacterization might be more beneficial since you should be able to just move the stocks into the traditional IRA (but check with your custodian).  Your traditional IRA contributions may be tax-deductible. The deduction may be limited if you or your spouse is covered by a retirement plan at work and your income exceeds certain levels. Please see IRA deduction limits for details.

You will enter the recharacterization when you enter the contribution to the Roth IRA 

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “IRA contributions” 
3. Click on “Jump to IRA contributions"
4. Select “Roth IRA”
5. Answer ‘Yes” on the “Roth IRA Contribution” screen
6. Answer “No” to “Is This a Repayment of a Retirement Distribution
7. Enter the Roth contribution amount 
8. Answer “Yes” to the recharacterized question on the “Switch from a Roth To a Traditional IRA?” screen and enter the contribution amount (no earnings or losses) on the next screen.
9. TurboTax will ask for an explanation statement where it should be stated that the original $xxx.xx plus $xxx.xx earnings (or loss) were recharacterized.
10. On the screen "Choose Not to Deduct IRA Contributions" answer "Yes" if you are thinking about doing a backdoor Roth (only works if you don't have pre-tax funds in your traditional/SEP?SIMPLE IRAs). Otherwise, select "No". (If you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a warning and then a screen saying $0 is deductible)