topic Because of my AGI for 2018 I now learn that I overpaid to my Roth IRA for both my spouse and I. Can i now back out the excess payments before April 15, 2108? in Retirement tax questions

Because of my AGI for 2018 I now learn that I overpaid to my Roth IRA for both my spouse and I. Can i now back out the excess payments before April 15, 2108?

kwboardman — Sat, 01 Jun 2019 21:10:33 GMT

You can, but you also have another option. You may choos...

DanielV01 — Sat, 01 Jun 2019 21:10:34 GMT

You can, but you also have another option. You may choose to recharacterize the excess contributions to a nondeductible Traditional IRA, and then immediately convert the nondeductible TIRA back into a Roth IRA. Because of your income, you cannot directly contribute to a Roth IRA. However, this technique is appropriately called a back-door Roth because it gets around the income limitations for making a direct contribution to a Roth in the first place.

There are no income limits for making a nondeductible TIRA contribution, and when you recharacterize your Roth contribution (you cannot recharacterize a Roth conversion), it treats the original Roth contribution as if it never happened, so you don't have an overcontribution penalty. (Make sure that your plan administrator correctly reports this as a recharacterization in your records).

A conversion of a TIRA to a Roth is also not limited by your income. By immediately converting the recharacterization of the Roth, you keep your Roth (but you will have more reporting). This year, you will report the recharacterization as a nondeductible TIRA contribution so that you can report the basis on Form 8606 (which you will need next year), and in 2020 (for 2019's tax return), you will report the conversion.

This FAQ provides a little more information on how this will get reported next year: https://ttlc.intuit.com/replies/6768029

Re: You can, but you also have another option. You may choos...

kwboardman — Thu, 19 Mar 2020 23:04:09 GMT

If i didn't re characterize my ROTH as you suggested , but instead moved my excess contribution back to a regular non-IRA account, got the calculated interest gained and reported it on my 2018 taxes via FORM 4852, should that be sufficient? Where I am perplexed is that now in 2019, I get FORM 1099R from my financial institution, with the same information. I shouldn't have to pay the interest gained on my excess contribution twice! Can i merely ignore the 1099 forms?

Re: You can, but you also have another option. You may choos...

ThomasM125 — Sun, 22 Mar 2020 20:54:37 GMT

You should report the form 1099-R as it is reported to you. You will then make an adjustment to "other income" as a negative amount to remove the taxable income reported on your return as follows:

1. Go to the "Federal" section of TurboTax

2. Click on "Income and Expenses"

3. Find "Less Common Income" and choose the last entry "Miscellaneous Income"

4. On the next screen, "Miscellaneous Income" choose the last entry "Other Reportable Income"

5. Enter a description for your entry (Dup pension inc reported), and enter the taxable amount you want to exclude from income as a negative number