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Here's my problem:

Based on erroneous information received from several supposedly reliable sources, I find that I have contributed more than allowed to IRA's as follows.

In February 2002 I opened and funded the following IRA's:
Roth IRA $2000 (2001 tax year)
Roth IRA $2000 (2002 tax year)
Traditional Non-Deductible IRA $2000 (2001 tax year)

After researching the IRS site, I find that the 2001 Traditional IRA is in excess of the allowed combined total of $2000 for tax year 2001. I have not filed my return for 2001 as yet (have extension). I am allowed a total of $3500 for tax year 2002 on my Roth IRA (I'm over 50 and my AGI is less than $95K).

How should I resolve this?? Should I transfer $1500 into my Roth for 2002 (and would I need to also recharacterize the contribution since it would be for a different tax year? Could I transfer the remaining $500 to the Roth and recharacterize it for 2003 or would I have to wait until January to do the recharacterization? Or should I just revoke the Traditional IRA (is this possible?), suffer the penalties, and start over in a taxable account. If I transfer the assets directly from the Traditional IRA into a taxable account (without liquidation) can I defer gains taxes until the assets are liquidated out of the taxable account?

Lastly, I wish to apologize for any erroneous information I may have posted on this board in the recent past. The information was derived from an investment seminar presented by someone who represented himself as a Certified Financial Planner (and who I found out was just STUDYING for CFP certification). The information was also reinforced by a retirement calculator on one of the financial web sites which indicated that I was eligible to fund EACH of the two IRA's to the maximum amount instead of BOTH in combination.

The lesson I have learned is ALWAYS verify any information received before acting on it. I had verified that, starting in 2002, I could contribute the maximum of $12,000 into my 403(b) and $12,000 into a 457 plan (previously you could only contribute the maximum amount into both plans combined). So when I was told that the maximum was allowed in EACH of the IRA's, I thought it was a parallel situation, and I failed to do the necessary homework. So now I'm faced with the effort (and possibly some financial penalties) required to undo this mistake. Hopefully my error will help others in avoiding a similiar situation.
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