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unexpectedly over the income limit for Roth IRA - recharacterize and backdoor

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  • unexpectedly over the income limit for Roth IRA - recharacterize and backdoor

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  • #2
    Yes, you have the steps correct. BE SURE you have no pretax IRAs in your names. If so, you will need to do one of the following by 12/31/17:

    1. Convert to Roth,

    2. Roll into current employer 401k/403b (if allowed),

    3. Set up solo-401k for IC income and roll into that

    4. Pay tax calculated on a pro-rata basis.


    The gains go into the backdoor Roth, also, and you will pay tax at your top marginal rate.
    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3
      yes.

      you convert the gains as well and are taxed on them.

      you report it on 8606.

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      • #4
        Not a big deal this year.  However, the current House GOP tax reform proposal includes the elimination of the ability to recharacterize a Roth conversion.

        I can't see how this adds much tax revenue to the federal coffers.  Moreover, it removes one of the most flexible planning tools in the upper middle class taxpayer's arsenal.  Not terribly cool. :roll:

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        • #5
          We are in a predicament regarding inappropriately funding Roth IRAs and unfortunately, this activity dates back multiple years- at least 6 or 7 years. When my husband and I started investing, our "financial advisor" set up automatic contributions to ensure funding our retirement accounts.  Admittedly and embarrassingly, we did not bother checking up on any of the investments we made with him thinking we were in good hands. When I decided to transfer the funds from these accounts to Vanguard where I have other accounts including my 403b, I realized the IRA that we were funding were Roths. We have never been eligible based on income. What do I need to do at this point o rectify this matter???

           

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          • #6


            However, the current House GOP tax reform proposal includes the elimination of the ability to recharacterize a Roth conversion.
            Click to expand...


            Yes, that's true, but I'd like to clarify to others reading this that one can still recharacterize a *contribution.*

            https://www.irs.gov/retirement-plans/ira-faqs-recharacterization-of-ira-contributions

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