I made a $6,000 contribution to my Roth IRA in 2022.

H&R Block is telling me I need to 'recharacterize' the contribution to a TraditIonal IRA by October 2023.

What did I do wrong here? Do I need to look into a back door Roth?

I have already contributed $6,500 for tax year 2023.

It means you made too much money to contribute to a Roth.

Happened to me unknowingly in the most annoying of ways… a grant of corporate private equity units I wasn't allowed to sell but they still counted as income.

I also didn't learn about my mistake till tax time and had also already contributed into my Roth for the next year (And I knew I'd get a similar grant at the end of the year).

You should jump on it ASAP. The recharacterization process means you have to basically account for gains on the contributions, so the longer you wait, the more you'll have to move around (though maybe not in this market). It is a giant PITA.

Way back in 1990 I started a new job in the middle of the year, had not yet qualified for the company retirement plan. Put $2000 (the max back then) in an IRA, about 6 months after filing got a notice it was disallowed because "Retirement plans were offered by your company" and had to yank it out and was fined $250. It was way easier to pay then argue.

Don't know your filing status... but here are the 2022 limits

ROTH IRA
https://www.irs.gov/retirement-plans/plan-participant-employee/amount-of-roth-ira-contributions-that-you-can-make-for-2022

Looks like the ROTH limits are increasing a bit in 2023
https://www.irs.gov/retirement-plans/amount-of-roth-ira-contributions-that-you-can-make-for-2023

Assuming you have a retirement plan at work, the phaseouts are even lower for a traditional IRA.
https://www.irs.gov/newsroom/irs-announces-changes-to-retirement-plans-for-2022

Thanks for all of the feedback. Deadbq, similar situation.

Do I need to also recharacterize the 2023 contributions? Should I look into a back door Roth?

suppose it's a blessing to be above the limit but if I understand correctly from only recently having to do this there really isn't much to 'look into' with backdoor and its really just a nonsensical/trivial extra step of sending the money into a tIRA account for a day before moving it into Roth the same way you would otherwise.
Doesn't seem to be any logical reason this should be required or anything it actually accomplishes for the IRS?

Not everyone can do a backdoor Roth without it being a taxable conversation. It's not always as easy as the blogs make it out to be.

yea I haven't looked into it enough to understand taxable situations, personally I just deposit the full amount into tIRA acct in money market/settlement fund, then the next day move it to Roth account nothing gets taxed
not sure what prevents others from doing the same

EliteZags said:

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yea I haven't looked into it enough to understand taxable situations, personally I just deposit the full amount into tIRA acct in money market/settlement fund, then the next day move it to Roth account nothing gets taxed
not sure what prevents others from doing the same

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Look up the pro-rata rule

hypeiv said:

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Not everyone can do a backdoor Roth without it being a taxable conversation. It's not always as easy as the blogs make it out to be.

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I made this mistake last year. DO NOT do a backdoor Roth if you have any sort of pre-tax IRA rollover account (I rolled over an old 403b to an IRA).

The IRA treats all of your traditional IRAs as one big account. So, if you put after-tax $ into one IRA and then roll it over to a Roth via the backdoor method, you will owe taxes on that contribution IF you have any other pre-tax IRA accounts.

If you do not have any other rollover IRA accounts (besides the one you use for the backdoor Roth), you should be fine.

Sorry to ask, I'm new to this. Best online service to start a Roth IRA with?

Mine is through Vanguard because I like their VTSAX index fund.

Thank you!

Hearne_Ag said:

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Sorry to ask, I'm new to this. Best online service to start a Roth IRA with?

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Unchained Capital

You can hold physical Bitcoin in a Roth

If you use post tax money to contribute to a traditional IRA can't you just transfer that to a Roth?

Edit: Saw answer above. "Just make sure you don't have any real traditional pre-tax IRA accounts laying around"

That's what I thought, but apparently there are some limitations. You have to be under a certain income threshold and there is a $6.5k limit.

exp said:

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Hearne_Ag said:

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Sorry to ask, I'm new to this. Best online service to start a Roth IRA with?

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Unchained Capital

You can hold physical Bitcoin in a Roth

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"Physical bitcoin"