To make matters worse, I converted 10,453.52 from my tIRA to my Roth earlier this year (that's how confident I was that we were going to be well under the phaseout/cutoff).
Given the above, I've stopped all contributions to my Roth pending what comes up in my business.
Let's assume I go over the income limit (great problem to have I suppose).
https://www.irs.gov/retirement-plans/pl ... ion-limitsTo avoid the excess contributions tax:
withdraw the excess contributions from your IRA by the due date of your individual income tax return (including extensions); and
withdraw any income earned on the excess contribution.
See Pub 590-A for certain conditions that may allow you to avoid including withdrawals of excess contributions in your gross income.
1. I understand the above to mean that I can withdraw the contribution while avoiding a 6% tax penalty, but will have to pay 10% tax on the income earned on the excess contribution absent the usual conditions? Correct?
2. Getting back to that aforementioned 10k conversion. So, as I type this my total Roth amount is about 15k. I've contributed 2769.17 (strange amount due to Fidelity rewards points being deposited there). I have 2473.09 in gains as I type this. Some of those gains comes from that 10k that I converted, of course. So, how much of that is needs to be withdrawn to be taxed at that 10%?
3. Wading deeper into the waters, I understand that I can re-characterize the Roth contributions to a tIRA. Will this potentially solve my problem?
https://www.irs.gov/retirement-plans/ir ... tributions (my emphasis)
A recharacterization allows you to treat a regular contribution made to a Roth IRA or to a traditional IRA as having been made to the other type of IRA.
. . .
To recharacterize a regular IRA contribution, you tell the trustee of the financial institution holding your IRA to transfer the amount of the contribution plus earnings to a different type of IRA (either a Roth or traditional) in a trustee-to-trustee transfer or to a different type of IRA with the same trustee. 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).
To make matters interesting, I've already made 1347.69 in contributions to my tIRA this year.
FWIW, I'm not currently covered by a retirement plan at work; DW is, and is maxing out her 401k.
4. If I can or should re-characterize, I would obviously fall under the 6k limit with my prior 1347.69 straight contribution to my tIRA plus the 2769.17 that I've contributed to my Roth this year (4116.86). If I include the entirety of the 2473.09 in gains, I'll be over. So, again, how much of those gains are calculated as being part of the excess?