ruben wrote:

- quote -

Sorry, the recharacterization 'window' closes six months
after the filing date for that year. For 2004 contributions,
that was October 15, 2005.

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So there is no way to recharacterize the 2004 deposit to
2005? My earnings, as luck would have it, were quite high
on my IRA in 2004, 2005, the tax hit on the earnings would
be much more than the penalty.

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- quote -

I used TaxAct and it did give a yellow light on it (should
have flashed red lights, IMO). But I understood the $0 it
was indicating was how much my contribution was to be
reduced, not what it should be. I was not reading closely.
Happens.

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ruben wrote:

- quote -

As I understand the rules, you have until the tax due date
plus extension time to recharacterize an IRA transaction. So
the 2004 deposit passed its deadline of 4/15/05 (plus any
extension), but the 2005 deposit should be addressed and
changed to a regular IRA immediately. I recall that in 1999,
the IRS allowed an extension to 12/31/99 for 1998 deposits,
but that was a one time only deal to handle all the
confusion. And you are still beyond one year on the 2004
deposit. (Didn't your tax guy or tax software catch that,
and give you an error message?)

I hope someone can find a ruling to the contrary for you.

JOE

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"ruben" <rubenz1967[at]hotmail.com> wrote:

- quote -

2004: You owe a $360 penalty for the 2004 overcontribution,
and there's nothing you can do to change that. Nor can you
change to traditional. To avoid an additional $360 penalty
get the 2004 contributions and the earnings on them out of
your IRAs by 4/17/2005. You'll owe tax and the 10%
premature distribution penalty on the earnings, if they were
positive.

2005: You can either withdraw your contributions and the
earnings on them or "recharacterize" them as traditional IRA
transactions. IRS Publication 590 has the details, and your
custodian can walk you through either process.

--
Phil Marti
Clarksburg, MD

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In both 2004 and 2005, our MAGI exceeded $160,000. We file
married- joint return. In 2004 we deposited $6000 ($3000x2)
into our existing Roth IRAs, and $8000 ($4000x2) in 2005. I
have since discovered that we were not eligible to do this.
We were eligible for Traditional IRA contributions, though.
What is the best approach (minimal penalties) to correct
this error?

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