Ineligible Traditional IRA Contribution

[Steverino78]

I had forgotten that my Fidelity Rewards had been directed into my Trad IRA, which was fine in previous years when I was eligible for IRA contributions.  As it now turns out I am ineligible for Trad IRA contributions in 2024.  (Amidst 2024, I converted a high amount of Trad to Roth, which apparently put me over the Contribution limits for Trad IRA. 

I have $714 needing to be either Recharacterized or Converted.  Might this be resolved as simply as I made previous Roth conversions on Fidelity's site?  In other words, simply convert $714 out of the Trad and into the Roth?  Or does the fact that I would be converting Trad IRA contributions made in 2024 AFTER 12/31/24, create a problem?  Or are Roth conversions for 2024 taxes allowable up through 04/15/25?  

[DanaB27]

To clarify, did you get a penalty warning or just a notification that your income is too high to deduct the traditional IRA contribution? If you got the notification that your income is too high to deduct the traditional IRA contribution then you can still make the contribution. You just cannot deduct it.

You can always convert funds from traditional IRA to Roth IRA and there is no limit. Please make sure you do not enter conversions in the IRA contribution section. They are entered in the retirement section by adding your Form 1099-R for the conversion and indicating the conversion in the follow-up questions. Please see Where do I enter my 1099-R?

If you made a contribution for 2024 then you will enter this in the IRA contribution section on your 2024 tax return. The conversion made in 2025 will be reported on your 2025 return.

[Steverino78]

Turbotax software validated income as being too high to allow a Traditional IRA contribution (too high because of substantial Roth conversions).

These Traditional IRA contributions occured at the end of each month in 2024, as my Fidelity Rewards program fed these proceeds directly into my IRA.  Point being that the contributions were all made in 2024.  It is my understanding that Roth Conversions must be made in the same calendar year, in this case, by 12/31/24.  

These contributions are still liquid, parked in the sweep at Fidelity.  I understand how to perform this Roth conversion right now,   I'm left with this question:  Did my Roth conversion window of opportunity already pass (after 12/31/24) for these specific 2024 contributions?   Or am I allowed to make the conversion now in 2025, regardless of when the contributions were made, effectively moving out the IRS reporting of the contributions on to the 2025 tax season?  

[DanaB27 · Accepted solution]

Yes, you can convert the funds in 2025 and will report the conversion next year on your 2025 tax return. But you will enter the nondeductible traditional IRA contributions on your 2024 return and TurboTax will create Form 8606 with the basis on line 14. This basis will be carried over to your 2025 return.

No, you do not have to make the conversion in the same year as the contribution. It is fine that you made the contribution for 2024 and convert the funds in 2025.