Over income limit for Roth IRA-accidentally contributed :(

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Topic Author
NewtoInvesting321
Posts: 4
Joined: Tue Feb 11, 2020 3:22 am

Over income limit for Roth IRA-accidentally contributed :(

Post by NewtoInvesting321 »

Hello,
I’m a stay at home parent making 0 income. On our tax return we file married filing jointly.
I realized after making the contribution this March for my 2020 and 2021 Roth IRA that my husband now makes over the income limit. :oops: I assume I’m held to his income since we file jointly.
Is there anyway to fix this now?

I’ve read about calling vanguard and asking them to recharacterize it as traditional IRA contributions. Is that possible?
Could I ‘back door Roth’ it after? I’m unfamiliar with this process as I’ve only contributed to Roth IRAs in the past. :confused
Trying to avoid a big tax penalty. We have not yet filed our taxes for 2020 as of yet.

If it’s of any importance my husband fully funds his Roth 401k through his job.He has made no additional IRA contributions asides from that.

Any help would be greatly appreciated!!
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FiveK
Posts: 11550
Joined: Sun Mar 16, 2014 2:43 pm

Re: Over income limit for Roth IRA-accidentally contributed :(

Post by FiveK »

NewtoInvesting321 wrote: Tue May 11, 2021 2:12 am Is there anyway to fix this now?
I’ve read about calling vanguard and asking them to recharacterize it as traditional IRA contributions. Is that possible?
Could I ‘back door Roth’ it after?
Yes.
Yes.
Yes (especially if you have no pre-tax IRA balances).

Wiki articles IRA recharacterization and Backdoor Roth should be helpful.

Become familiar with Form 8606 if you choose to use the backdoor process.
devopscoder
Posts: 44
Joined: Tue Apr 20, 2021 9:35 pm

Re: Over income limit for Roth IRA-accidentally contributed :(

Post by devopscoder »

NewtoInvesting321 wrote: Tue May 11, 2021 2:12 am I realized after making the contribution this March for my 2020 and 2021 Roth IRA that my husband now makes over the income limit.
There are two income limits: single and married file jointly. Are you looking at the married file jointly Roth IRA limit which is a MAGI of about $200K?
Karamatsu
Posts: 1385
Joined: Mon Oct 27, 2008 2:42 am

Re: Over income limit for Roth IRA-accidentally contributed :(

Post by Karamatsu »

Assuming you have the numbers right, you should call Vanguard TODAY. There's an important difference between doing the recharacterization before the due date for your return and after. From the IRS FAQ:
If this is done by the due date for filing your tax return (including extensions), you can treat the contribution as made to the second IRA for that year (effectively ignoring the contribution to the first IRA).
Actually it sounds like if you file for an extension you wouldn't have to rush, but with the IRS it's always better to be safe than to assume they will behave like reasonable people.
Topic Author
NewtoInvesting321
Posts: 4
Joined: Tue Feb 11, 2020 3:22 am

Re: Over income limit for Roth IRA-accidentally contributed :(

Post by NewtoInvesting321 »

devopscoder wrote: Tue May 11, 2021 3:29 am
NewtoInvesting321 wrote: Tue May 11, 2021 2:12 am I realized after making the contribution this March for my 2020 and 2021 Roth IRA that my husband now makes over the income limit.
There are two income limits: single and married file jointly. Are you looking at the married file jointly Roth IRA limit which is a MAGI of about $200K?
I was looking at the married file jointly limit that is over 200k. His MAGI exceeds that income limit for 2020 and 2021.
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