I have been contributing my after-tax income to Traditional IRA instead of Roth IRA for past 3 years without knowing.
2012: After tax income $1000 into Traditional IRA
2013: After tax income $5500 into Traditional IRA
2014: After tax income $5500 into Traditional IRA
I found this out when I tried to do a 2015 Roth IRA conversion few days ago, and my account didn't allow me to, saying that I do not own any Roth IRA account. The reason is that, I use Charles Schwab for my retirement accounts, and Schwab uses the word 'Contributory Account', which actually means 'Traditional IRA' account.
Anyway, is there a way that I can fix this mistake? I guess the simplest course of action is to transfer all my money in Traditional IRA account to Roth IRA, but I am afraid I might need to pay taxes again for the money which is already after tax income.
1. Is there a chance that I can fix this issue? Ideally, I want all my contributions to Traditional IRA in past 3 years to be treated as contributions to Roth IRA.
2. Is there any problem with a fact that I contributed after tax income into Traditional IRA? Can I take it out without penalty since it was after-tax money? My income has been high enough for past 3 years that I do not get any tax deductible advantages by contributing to Traditional IRA.
I will be calling IRS sooner than later, but just wanted to ask question here as well.
- posted 4 years ago