Excess Roth IRA Contribution

[cwzkevin]

Both my wife and I each contributed $7000 directly to Roth IRA for 2024 tax year, and then the Turbo Tax Deluxe told me that our MAGI for 2024 was too high that we can't contribute to Roth IRA.

Wife's account:

• Contribution was made 2/28/2024, 3/15/2024, 3/22/2024 total $7000;
• On 4/11/2025, she opened her first ever traditional IRA and instructed Fidelity to 'recharacterize' the Roth IRA to traditional IRA,
• The calculation by Fidelity comes back as: loss of the computation period was $-981.74, the total amount recharacterized was $6018.26. So, the system is transferring some stocks and some cash total of $6018.26 from Roth IRA to traditional IRA (as of now, it is still 'Processing').

My account:

• Contribution was made 3/20/2025, 3/24/2025 total $7000;
• On 4/9/2025, I instructed Fidelity to 'withdraw' this excess $7000 contribution to a Fidelity individual brokerage account;
• On 4/11/2025, Fidelity is moving $6,488.52 cash from the Roth IRA to the individual brokerage account (I think it means the loss was $-511.48, and as of now, it is still 'Processing').
• Also on 4/11/2025, I opened my first ever traditional IRA and hoping I will be able to contribute to this account for year 2024 once the excess Roth IRA 'withdraw' is complete. As of right now, Fidelity still showing I have already contributed to IRA for year 2024.

Questions:

1. When my wife backdoor converts her traditional IRA to Roth IRA before 4/15/2025, does she need to add some cash to make the total $7000 or the maximum she can backdoor to Roth would be those stocks and cash in the traditional IRA, current market valued at $6018.26?

2. When my $7000 excess Roth IRA contribution 'withdraw' is complete, i.e., become $6488.52 cash in my brokerage account, I will be able to contribute to year 2024 IRA again, right? If that is the case, how much can I contribute to the traditional IRA? Of course, my intention is also backdoor convert to Roth IRA once it is in traditional IRA.

3. I am totally lost in TurboTax for my current situation. If both my wife and I were able to do the backdoor Roth IRA conversion, how would I proceed in TurboTax?

In Deduction & Credits, under Traditional IRA and Roth IRA, how should I move forward? As below, do I check both Traditional IRA and Roth IRA?

Below is instruction from another software:

https://community.freetaxusa.com/kb/articles/55-backdoor-roth-plus-a-recharacterization-recharacteri...

What about TurboTax? And, please note, my wife is 'recharacterize' and I am doing excess contribution 'withdraw'.

Much appreciate any help!

[DanaB27 · Accepted solution]

1. No, she doesn't need to add cash. She already contributed $7,000 for 2024. She can contribute for 2025 and then convert the 2024 and 2025 contribution together.

2. Yes, you can contributed $7,000 to the traditional IRA since you withdrew the $7,000 Roth IRA contribution (with a loss).

3. Your wife will select Roth IRA and you will select Traditional IRA. Don't select Roth IRA for yourself since you withdrew the Roth IRA contribution.

1. Click on "Search" on the top right and type “IRA contributions” 
2. Click on “Jump to IRA contributions"
3. Select “traditional IRA” for you and "Roth IRA" for your wife
4. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
5. Enter the amount you contributed to the traditional IRA
6. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
7. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “No” since you had no Traditional IRA with basis.
8. Answer ‘Yes” on the “Roth IRA Contribution” screen
9. Answer “No” to “Is This a Repayment of a Retirement Distribution
10. Enter the Roth contribution amount 
11. Answer “Yes” to the recharacterized question on the “Switch from a Roth To a Traditional IRA?” screen and enter the contribution amount of $7,000  (no earnings or losses) on the next screen.
12. TurboTax will ask for an explanation statement where it should be stated that the original $xxx.xx minus $xxx.xx  loss were recharacterized.
13. On the screen "Choose Not to Deduct IRA Contributions" answer "Yes" (if you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a warning and then a screen saying $0 is deductible).

You will each have a 2024 Form 8606 with a basis on line 14 that will be carried forward to 2025.

Your conversion will be reported next year on your 2025 return since it happened in 2025. Please see How do I enter a backdoor Roth IRA conversion? for additional information.

[cwzkevin]

Thank you very much for the detail instruction and explanation!