In 2013, I contributed to a Roth IRA. In 2014, I re-characterized it to a traditional IRA to take the tax deduction. When it was re-characterized the broker transferred $164 too much. This was based on the IRS formula to transfer the original contribution and the earnings while it was in the Roth account. I assume I need to withdrawal the $164 as an excess contribution before I file my taxes in April. How do I show the excess was removed before filing to avoid any penalties?

ANSWER

The BIDaWIZ Team's Answer:

If the entire re-characterization is based off of a 2013 contribution, then your broker will report it as if it originally occurred in 2013. However, we suggest that the excess amount is applied to your 2014 tax return instead. You need to contact your broker immediately to articulate this to them. Timing is important because they are required to send out a form 5498 to the IRS after the tax due date to reflect IRA contributions and the years in which they are associated. This is referenced in IRS Publication 590 and Internal Revenue Code Section 408(a).