Hello,
I am a US citizen resident of Japan (HSP-2 if that matters) and have been abroad for almost 8 years now. Last year my financial advisor in the US suggested that I contribute to a Roth IRA. I opened the account and made the maximum contribution of US 6,500.
My tax accountant who has been preparing my US tax return just told me that I was in fact ineligible to make Roth IRA contributions due to my salary exceeding the limits (my spouse is Japanese, never lived in the US, so I am married filing separately and that seems to have a lower thresshold).
It's my fault for not looking into this more closely when we opened the account, but I am wondering what my options are to fix this. My tax advisor says I should have Fidelity "recharacterize" the Roth IRA to a traditional IRA, while my financial advisor sent me some form for an excess distribution to deposit the funds back into my US bank account. I've also read online about the possibility of using a backdoor Roth IRA but I don't quite understand how that works.
Does anyone have experience dealing with this and perhaps know what the best course of action is here? I need to have this sorted before filing my 2023 US tax return, which I hope to do soon and before the expat extension to June 17th. Is there anything else I should do so as not to trip any alarms etc. with the IRS? Any advice would be greatly appreciated. My risk appetite is low so want to do this as conservatively as possible.
by harpn545