Personal Finance & Money Asked by Panic on August 6, 2021
I made 3 non-deductible contributions to my traditional IRA account in 2019, 2020, and 2021. Instead, I should have contributed the money to Roth IRA. What would be the best way to fix this?
Here is a list of all my contributions.
| year | contribution | |
|---|---|---|
| 2018 | 5500 | deductible |
| 2019 | 6000 | non-deductible |
| 2020 | 6000 | non-deductible |
| 2021 | 6000 | non-deductible |
I’m reading Publication 590-A, and it looks like I can recharacterize my 2020 and 2021 contributions. In this case, will I have to pay taxes on the gains attributable to the contributions?
For what it’s worth, I also have 401k and 403b accounts.
No taxes are paid on a recharacterization. A recharacterization treats the contribution as if it were made to the second type of IRA from the beginning. Any earnings attributed to the recharacterized contribution (calculated according to some worksheets) are moved to the second IRA, and are treated as if they were earnings that were made in the second type of IRA (in this case, Roth IRA). I am assuming that you have verified that you are eligible to contribute $6000 to Roth IRA for 2020 and 2021.
Correct answer by user102008 on August 6, 2021
You have reinvented the Backdoor Roth IRA by mistake :)
... roll over existing traditional IRA money into a Roth—as much as you want at one time, even if it's more than the annual contribution limit ...
Answered by Orange Coast- reinstate Monica on August 6, 2021
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