Traditional IRA - Can I move excess contribution from ROTH IRA

[mabidi]

In 2023 I had excess contribution of $5777.66. So I rolled over to 2024 Roth IRA. Now in 2024 the tax Software tells me that I cannot contribute any funds to ROTH IRA due to high MAGI. If I move this excess to traditional IRA, do I have to pay penalty of 10% i.e., about $577.66. Is this a good move or should I move excess contribution to 2025 Roth ira and hope that I can contribute in 2025 to Roth ira. 

[DanaB27]

You cannot recharacterize a contribution after the due date. Therefore, you cannot move the funds to a traditional IRA via recharacterization. To avoid the 6% penalty in future years you will have to remove the excess contribution. You then can make a new Traditional IRA contribution for 2024 or 2025. 

You will have to pay the 6% on your 2024 tax return since cannot apply the excess contribution as a 2024 contribution and didn't remove the excess by December 31, 2024.

To remove the excess contribution you will take a regular distribution of $5,777.66 (without earnings) since it is after the due date of the 2023 return. You will get a 2025 Form 1099-R with code J (if you are under 59 1/2) and this will be entered next year on your 2025 return and resolve the excess contribution:

1. Click on "Search" on the top and type “1099-R” 
2. Click on “Jump to 1099-R” and enter all your 1099-Rs
3. Click "Continue" on the "Review your 1099-R info" screen
4. Answer all the questions and make sure you enter the net contributions prior to 2024 on the "Enter Prior Year Roth IRA Contributions" screen (include the excess contribution here)
5. On the "Do you have any Excess Roth Contributions" answer "Yes"
6. On the "Enter Excess Contributions" screen enter the total excess contribution from 2023.

No, you do not have to pay the 10% early withdrawal penalty since you can withdraw contributions you made to your Roth IRA anytime, tax- and penalty-free. 

[Edited 4/2/2025 | 5:51 am PST]

[mabidi]

The following is a confusing statement "You cannot recharacterize a contribution after the due date. Therefore, you cannot move the funds to a traditional IRA."

And then you said

"To avoid the 6% penalty in future years you will have to remove the excess contribution."

If I am removing excess funds then it can also be moved anywhere I like including traditional IRA.

I have not yet filed my taxes and tax deadline has not passed so I should be able to remove funds.

[DanaB27]

I was referring to that you cannot move the funds via recharacterization. Meaning you cannot count it as Traditional IRA contribution for 2023. Please see What is a IRA recharacterizations? for additional information. 

Yes, if your remove the funds then you can make a new Traditional IRA contribution for 2024 or 2025.

Note, the deadline to remove a 2023 excess contribution without a penalty has passed. Therefore, you only need to remove the excess contribution without the earnings.