Roth contributions when past income limits

[Mafek]

Hi everyone

I got some bad advice and contributed to a Roth  for me and my husband this year and last despite being over the income limit.  Now I am worried about they penalty.  Any advise, please! Thank you!

Carrie

[jpdcpajd]

by last year do you mean 2013 if so you have until the extended due date(10/15/2014) to recharacterize it as a nondeductible IRA

[seattlecyclone]

You can withdraw the excess contributions (along with any earnings attributable to those contributions) to avoid the penalty tax, at least for the 2013 and 2014 tax years. You will have to pay the 10% early withdrawal penalty in addition to your standard marginal tax rate on the earnings, but that's likely much better than a 6% excess contribution penalty on the whole amount. Call your IRA provider and they should be able to help you process the withdrawal.

[Mafek]

Thank you!  Carrie

[CanuckExpat]

As someone else mentioned, a re-characterization will take care of this for you.
Going forward, you might want to investigate the "back door roth": http://www.bogleheads.org/wiki/Backdoor_Roth_IRA

[nawhite]

Also, after you re-characterize it, check out rolling it over back into a Roth. This is the classic "backdoor roth" that people talk about. Basically there are no income limits on rollover contributions right now so you can still get it into a Roth if you make it something else first.