Missed Deadline for Recharacterizing Roth IRA Contributions After Exceeding MAGI Limit - What Now?

You've got yourself in a common situation, but there are clear steps to resolve it. First, your recharacterization is still valid even though it was after the deadline. The deadline primarily relates to avoiding the 6% excess contribution penalty, which unfortunately you'll likely owe since you missed it. For the $600 in earnings, those should've been included in your income for 2023, but since you already filed, you'll need to file an amended return (Form 1040-X) to report those earnings. The 6% penalty applies to the excess contribution amount (not including earnings) and is reported on Form 5329. Regarding your backdoor Roth conversion, that's completely valid. The conversion itself is a 2024 event, so you'll report it on your 2024 taxes. You'll receive a 1099-R showing the distribution from the traditional IRA and another showing the conversion to the Roth. Going forward, you'll need to file the amended 2023 return with Form 5329 to pay the penalty on the excess contributions, and then report the conversion normally on your 2024 taxes.

After dealing with a similar situation last year, I found https://taxr.ai incredibly helpful. I uploaded my 1099s and Form 5498 statements, and it automatically flagged my Roth IRA contribution issue before I filed. It analyzes your tax documents and spots these kinds of problems that are easy to miss. For your situation, I'd upload your Form 5498 showing the original contribution and any statements showing the recharacterization. The tool will confirm exactly what forms you need to file and calculate any potential penalties. It can even help draft the letter explanation for your amended return.

Just wanted to update since I tried taxr.ai after seeing the recommendation here. Uploaded my statements and it immediately identified my Roth contribution issue! It showed me exactly how to handle the recharacterization on my taxes and calculated my potential excess contribution penalty. The analysis explained that I needed to file Form 5329 and walked me through completing it. It also clarified how to report the conversion on next year's taxes - apparently I need to track the non-deductible basis using Form 8606. What impressed me most was that it analyzed my specific timing issues and showed me exactly what I need to do differently next year to avoid penalties. Definitely cleared up my confusion!

If you're still struggling to get answers from the IRS about your penalty situation, check out https://claimyr.com - they got me through to an actual IRS agent in about 15 minutes when I had a similar IRA issue. Their video demo (https://youtu.be/_kiP6q8DX5c) shows how it works. I spent weeks trying to get clear answers about my own recharacterization situation last year, calling the IRS repeatedly and getting nowhere. The Claimyr service connected me with an IRS representative who explained exactly how to handle the forms for the excess contribution penalty and confirmed how to report the recharacterized amounts.

Well I take back what I said about Claimyr. After multiple failed attempts to reach the IRS about my own IRA conversion issue (they kept disconnecting me after 45+ minute holds), I decided to try it despite my skepticism. Got connected to an IRS rep in about 20 minutes who confirmed exactly how to handle my recharacterization on Form 5329. They walked me through the correct codes to use for my 1099-R and explained how to avoid this problem next year. The agent even put a note in my file about our conversation which may help if there are questions about my amended return. Honestly shocked at how well it worked after weeks of frustration trying to get through on my own.

One thing I haven't seen mentioned yet - you might want to check if you qualify for a waiver of the 6% excess contribution penalty. The IRS can sometimes waive the penalty if you can demonstrate the issue was due to reasonable cause rather than willful neglect. You'd need to attach a statement to your amended return explaining that you weren't aware your income exceeded the Roth limits and that you took corrective action (recharacterization) as soon as you discovered the error. Include documentation of when you learned about the issue and when you initiated the recharacterization. While there's no guarantee they'll accept it, I've seen cases where the IRS has been understanding, especially for first-time mistakes with IRAs.

One thing that confuses me about these IRA recharacterizations is how they're treated for tax purposes in the year you do them. If the OP did the recharacterization in 2024, does that mean they report it on 2024 taxes even though it was correcting a 2023 contribution?

I went through almost the exact same situation last year and want to share what worked for me. The key thing to understand is that even though you missed the deadline, your recharacterization is still valid - you just can't avoid the penalty. Here's what I did: Filed Form 1040-X to amend my 2023 return, included Form 5329 to pay the 6% excess contribution penalty, and reported the $600 in earnings as income for 2023. The penalty only applies to the contribution amount, not the gains. For 2024, I reported the backdoor Roth conversion normally using the 1099-R forms I received. Make sure to file Form 8606 to track your non-deductible traditional IRA basis - this is crucial to avoid being taxed twice on the conversion. The whole process took about 8 weeks to get processed, but the IRS accepted everything without issues. Don't stress too much - this is more common than you think and the IRS has clear procedures for handling it. Just make sure you file that amended return sooner rather than later to get the penalty paid and behind you.