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Would it be possible to recharacterize the excess to a Traditional IRA, even though past due, still paying the appropriate excise tax and distribution penalties? That way, I've contributed $200 to a Roth and $1800 plus earnings to a Traditional this year and, at least I have some Traditional money working Tax-deferred for me?

Sorry, but no. The deadline for recharacterizing was 10/16/2000. Since you missed that date, you'll just have the $200 allowable Roth contribution for 1999.

Or do I actually have to sell stocks to equal the Roth excess and receive a check in the mail?

You have to remove the excess contribution and earnings from the Roth. If you want to use $2,000 of the proceeds to make your year 2000 traditional IRA contribution and your custodian can accommodate you, you don't have to actually receive the check and send it back. But anything over that you have no choice but to take the money.

Should I wait until tax time to figure all this out since, I assume the 6% excise tax is only subject to interest and the other penalties stay the same? It's gonna get expensive having my accountant file an amended return now.

The 6% tax on the $1800 excess contribution was due 4/15/2000. If you don't get the money out by the due date of your 2000 return, you'll owe another 6% penalty for 2000. I don't see the point of waiting.

I also don't see the point of paying your accountant to file the amended return. It would take you all of 10 minutes to do it yourself, and we'd be glad to help you here on the boards if you have questions.

On the other hand, if this accountant knew of the illegal Roth contribution and didn't advise you about it when preparing your 1999 return, I might be asking him to prepare the amended return for free.

Phil Marti
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