I have contributed money to my Roth IRA and this is resulting in an overpayment. Can I move this money to a an existing traditional IRA?

[JaimeG · Accepted solution]

Yes, this is called a re-characterization and it will be done by your Brokerage firm. You will not receive any information regarding this re-characterization until next tax season as a 1099-R. For this year you will follow the steps below:

To report the recharactorization:

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.

When you arrive to enter your Roth Contribution you will indicate that you changed your mind and moved it to a Traditional IRA (re-characterized) and if asked that you want it all to be non-deductible. The re-characterized amount would be that of the Roth contribution - not any earnings. Enter an explanation statement of the amount re-characterized and earnings if any. That will create a 8606 form that will track the non-deductible basis of the non-deductible contribution.

You should receive a 1099-R next year with a code "R" in box 7. That only reports the re-characterization to the IRS and is ignored if entered into TurboTax.

[lme222]

This answer helped but why do I want the contribution to be non-deductible?

[JaimeG]

Since Roth Contributions are made with money that has already been taxed (out of pocket), the contributions remain non-deductible on your Tax Return. Basically it is the only aspect of the Roth that is not lost in the re-characterization.

[fanfare]

This is nonsense.
Your Traditional IRA contribution ( now recharacterized as such ), may have its deductibility phased out, or not. It depends.


For a Traditional IRA. With no retirement plan at work,
If Your Filing Status Is... single, head of household, or qualifying widow(er)
Or you are married and your spouse also is not covered by a retirement plan at work,
And Your Modified AGI Is... any amount
Then You Can Take...a full deduction up to the amount of your contribution limit.

[lme222]

So, I am receiving different answers.  What is the correct option?  TurboTax gives me the option to use the deduction.

[fanfare]

TurboTax knows the deductibility rules for your filing status and income and will tell you how much of your traditional IRA contribution is deductible.

[lme222]

Thank you.

[fanfare]

Maybe this person does not want an IRA with a basis to be kept track of.
Instead you can withdraw the excess Roth contribution from your Roth.
in any case time is running out, you have to repair this by the due date of your tax return ( including extensions) to avoid penalties.