Roth IRA- options if 2013 AGI is above limits

[Anonymous]

In 2013, I contributed $5k to a roth IRA. Now that we are preparing our taxes, a little worried our AGI will be above the Roth IRA income limits afterall. I earned alot more in bonus than expected. Totally unexpected and probobly won't happen again, but very happy about it. My question is: Can I transfer the 2013 Roth contributions to our 529 plan before April 15? Will there be any consequences from doing so?

[Anonymous]

Sometimes your financial provider will let you re characterize the contribution. Might be but to make a transfer to the 529 but it might be easier just to do a non-deductible Ira. Call your provider.

[Anonymous]

You can undo your contribution before you file your tax return-- you may end up paying some add'l taxes on the gains. The 529 is a completely separate issue.

[Anonymous]

You can re-characterize your Roth contribution (and any earnings) as traditional IRA before April 15. Once you know for sure you are not eligible just call your financial institution and the should be able to do this over the phone.

I don't think there should be any tax implications. If it were the other way around (traditional to Roth) then there would be.

Note also, you cannot deduct the contributions on your taxes - this will end up as a non-deductible traditional IRA.

[Anonymous]

Anonymous wrote:You can re-characterize your Roth contribution (and any earnings) as traditional IRA before April 15. Once you know for sure you are not eligible just call your financial institution and the should be able to do this over the phone.

I don't think there should be any tax implications. If it were the other way around (traditional to Roth) then there would be.

Note also, you cannot deduct the contributions on your taxes - this will end up as a non-deductible traditional IRA.

PP here -- and one more thing that you can do (if you are up for a few more steps) is the Backdoor Roth. That way the money winds back up in your Roth and continues to grow tax-free. You would have to consider first though whether you have any other traditional IRAs that you funded with pre-tax money (deductible IRAs).

http://www.bogleheads.org/wiki/Backdoor_Roth_IRA