Correct values for IRA contribution amounts after overcontribution and recharacterization?

heywhatsup
heywhatsup Member Posts: 2 Newcomer
in After you file

I overcontributed to my ROTH IRA by $750 and have recharacterized it. Prior to this, I did not have a traditional IRA. Going through FreeTaxUSA to file my taxes, it is continually warning me that I've overcontributed. The only way to get rid of the warning is to answer $0 for my traditional IRA contributions. I want to make sure that I'm putting the right values.

What do I answer for the following questions?
Enter any traditional IRA contributions you made during 2025: Should this be $0 or $750?

Enter any Roth IRA contributions you made during 2025: $7000?

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Answers

  • RyanV
    RyanV FreeTaxUSA Admin Posts: 65 image

    Hi @heywhatsup

    If i'm understanding your situation correctly - unfortunately, recharacterizing the $750 doesn't resolve the overcontribution. The $7,000 limit applies to your total IRA contributions across all account types combined - so $7,000 Roth + $750 Traditional still equals $7,750, which is $750 over the limit.

  • heywhatsup
    heywhatsup Member Posts: 2 Newcomer
    edited April 13
    https://community.freetaxusa.com/discussion/comment/8000#Comment_8000

    Hi, so I overcontributed to my Roth only. Prior to the recharacterization, I had not contributed to Traditional at all - so to rephrase, between my Roth and Traditional IRAs, I contributed a total of $7000. What value should I be putting for my Traditional and Roth contributions? Should it be the values prior to the recharacterization?

    I think my confusion stems from how the software works since after inputting these values, it asks for how much was recharacterized.

    Also, am I able to submit my taxes prior to my brokerage recharacterizing my contributions? I'm assuming not?

    Thanks!

  • Te_ariki
    Te_ariki Member Posts: 24 Level 4
    edited April 13

    @heywhatsup I realize that you think it's $7000 for each IRA but that's incorrect. It can't be more than $7000 for all of your traditional and Roth IRA's. Look at the third bullet point on this IRS site for IRA's.

    https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits

  • kiarab
    kiarab FreeTaxUSA Agent Posts: 285 image
    edited April 16

    Hello heywhatsup,

    If you contributed 7,000 (between your Roth IRA contributions and your Traditional IRA contributions), then in our software will want to enter the amount for each type of IRA, like this:

    Traditional IRA contributions: 6,250
    Roth IRA contributions: 750

    You will want to mark that you recharacterized some of your contributions on that same page. The next page should ask you what contributions your recharacterized. You will want to indicate that you recharacterized your Roth IRA contributions. Some space will provided for you to enter information about the contribution and when you recharacterized it.

    That should report your recharacterization correctly. If you are still having problems, you may want to contact customer support. There may be something that has been missed on your return.

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