Solved: Excess Roth IRA contribution
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kk4
New Member

Excess Roth IRA contribution

We contributed money to traditional IRA in December 2018, then covert it to Roth IRA in February 2019.  The fund converted to the Roth IRA was applied to Tax year 2018.  When we work on the Turbo Tax, we are informed that we have excess Roth contributions because our income is too high.  We are suggested by Turbo Tax to “recharacterize” the excess Roth IRA money back to traditional IRA.  However, the financial institute reply to us that “The Tax Cuts and Jobs Act repealed the ability to recharacterize a conversion. That means if you converted a traditional IRA to a Roth IRA in 2018 or after, you are not be able to recharacterize it back to a traditional IRA.”  If so, how can we do to avoid the tax penalty? Thank you very much!


1 Best answer

Accepted Solutions
macuser_22
Level 15

Excess Roth IRA contribution

You are mixing apples and oranges.

A *contribution* has nothing to do with a *conversion*.

The ONLY thing that goes on your 2018 tax return is the Traditional IRA contribution - nothing should be entered in the Roth section at all.   The 2019 Traditional IRA to Roth conversion will be reported on your 2019 tax return a year from now and it will be a 1099-R *converted* to a Roth, not a recharacterization.

Since you converted to a Roth, be sure to say you want the Transitional IRA contribution to be non-deductible, then it will appear on a 8606 form line 1,3 and 14 that will be part of the 2018 tax return.  You will need the line 14 amount to enter next year to offset the tax on the 2019 conversion.

Enter IRA contributions here:
Federal Taxes,
Deductions & Credits,
I’ll choose what I work on (if that screen comes up),
Retirement & Investments,
Traditional & Roth IRA contribution.

OR  Use the "Tools" menu  (if online version under My Account) and then "Search Topics" for "ira contributions" which will take you to the same place.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

View solution in original post

1 Reply
macuser_22
Level 15

Excess Roth IRA contribution

You are mixing apples and oranges.

A *contribution* has nothing to do with a *conversion*.

The ONLY thing that goes on your 2018 tax return is the Traditional IRA contribution - nothing should be entered in the Roth section at all.   The 2019 Traditional IRA to Roth conversion will be reported on your 2019 tax return a year from now and it will be a 1099-R *converted* to a Roth, not a recharacterization.

Since you converted to a Roth, be sure to say you want the Transitional IRA contribution to be non-deductible, then it will appear on a 8606 form line 1,3 and 14 that will be part of the 2018 tax return.  You will need the line 14 amount to enter next year to offset the tax on the 2019 conversion.

Enter IRA contributions here:
Federal Taxes,
Deductions & Credits,
I’ll choose what I work on (if that screen comes up),
Retirement & Investments,
Traditional & Roth IRA contribution.

OR  Use the "Tools" menu  (if online version under My Account) and then "Search Topics" for "ira contributions" which will take you to the same place.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

View solution in original post

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