Roth IRA recharacterization question

Forum|Forum|2 years ago
January 18, 2024
1 reply
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I contributed to a Roth IRA in 2023 for the years 2022 and 2023. I figured this year I am not eligible for Roth since I filed my taxes as MFS. After some research, I am considering a Roth recharacterization. I don't have any existing Traditional IRA account (no pre-tax money). So I think I don't have an issue with pro-rata calculation. As I understand, the gains on the money in taxable after recharacterization to traditional IRA (I will backdoor it as soon as recharacterization is done). My questions are:

Do I report the gains in this year's tax filing since the recharacterization is happening this year?
One I backdoor the money, my tradition IRA will be empty. Can I backdoor this year's contribution?

Thank you.

Not A Product Question

fanfare

Level 15

recharacterization: the original amount to the first IRA you report as contribution to the second IRA, earnings move but are ignored. You must use a trustee-to-trustee transfer.
report this on your tax return for the year during which the contribution was made.

you can recharacterize a 2023 contribution beforeTax Filing Day, including extensions if you request an extension.

It is too late to recharacterize a 2022 contribution.

after tax due date including extensions: you distribute the excess amount being carried forward on 5329,
(or offset it with currently allowed contribution) .

An amended return will be needed supplying Form 5329 since there is a 6% penalty per year on excess contributions .

Any positive earnings stay in the Roth account.

@Scouse-s

Scouse-sAuthor

Level 3

Thank you for the reply. Few questions:

As you said, I can recharacterize the 2023 contribution, but don't I have to pay taxes on the gains? I wasn't clear on that. If yes, then should I put that in this year's tax return.
The 2022 contribution was made in 2023, even then I can't recharacterize?
I didn't understand the distribute the excess amount being carried forward part? Does it mean I withdraw that amount from the IRA?

Thank you!