Roth IRA recharacterization missed deadline

Forum|Forum|1 year ago
February 2, 2025
1 reply
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I contributed $3000 to my Roth IRA in 2023. I didn’t realize my AGI was too high in 2023 until January 2025. I know it is too late to recharacterize. What are my options now to fix this?

Best answer by dmertz

You must obtain a regular distribution of the amount of the excess with no adjustment for investment gain or loss. When making this regular distribution, tell the IRA custodian nothing about this distribution being to correct an excess contribution, doing so will only potentially cause them to process the distribution incorrectly.

This distribution will be a nontaxable distribution of Roth IRA contribution basis.

Because the excess will not be corrected until 2025, you'll have excess contribution penalties on both your 2023 and 2024 tax returns. The reporting of the distribution on your 2025 Form 5329 will eliminate the excess.

dmertzAnswer

Employee

This distribution will be a nontaxable distribution of Roth IRA contribution basis.

eleeleeAuthor

But won’t the regular distribution be taxed at the current tax rate since I am under 59 1/2? Is it possible to use the excess and transfer it to 2025 IRA ( not Roth ) contribution?

dmertz

Employee

The distributions of the excess contributions mad in 2019 through 2023 will be nontaxable distributions of contribution basis. The distributions will be included on Form 8606 Part III where contribution basis will be subtracted to determine that the taxable amount is zero.

The only contribution for which the deadline has not passed to recharacterize to be a traditional IRA contribution instead is the contribution made in 2024.