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I'm new here. Please help. Sorry this is a little long. Wife contributed after-tax $5000 to her several years old traditional IRA in increments over 12 months. At the end of 2010 in December, she rolled all that Traditional IRA to a Roth to take advantage of the rule to allow splitting and delaying the reporting of the taxable proceeds to 2011 and 2012. Ooops. Combined income too high for a 2010 Roth contribution. According to TurboTax that $5000 must be considered an excess contribution since she may not contribute to a Roth at all in 2010. The rollover to the Roth could only be for pre-2010 monies, says TurboTax. TurboTax gives a very confusing set of options for dealing with this. None seem reasonable (I know, "stop using logic or you will hurt yourself.")Can we just call the brokerage firm,say please recharacterize that $5000 back to the Traditional IRA, write the IRS a note saying 'sorry, the rules were too confusing for mere mortals and call it even?' Or must we somehow also figure out how much gains that $5000 has made from the end of December to the recharacterizing date and transfer that extra meager amount back to the Traditional IRA as well? Or is TurboTax just wrong about legally contributing after-tax money to the Traditional IRA in 2010 and rolling all of that IRA into a Roth at the end of 2010? Thanks for your thoughts and expertise.
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