What about a recharacterization of a roth to a traditional?

Can I recapture erroneously withheld tax back into Roth IRA so that the Roth is maxed out with the full $5k?

• I inadvertently ticked the box to withhold 10% tax on my 2012 IRA to Roth conversion, and my broker sent the withholding to the IRS. This resulted in only $4,500 of my $5,000 IRA contribution making it into the Roth. I am NOT asking how to get the tax refunded. I am asking how to correct it such that there is $5,000 in my Roth for 2012 rather than only $4,500 in my Roth (with the missing $500 being the amount pulled out and sent to the IRA). I am asking how to make up the missing $500 difference in the Roth. If anyone can also tell me how to avoid the 10% penalty for the early distribution (which is what my erroneous withholding of tax is considered to be), that would be icing on the cake.

• Answer:

  Take your checkbook out of your pocket and write a check for $500 and deposit it to the Roth account. You have 60 days from the date of the conversion to do so and avoid the 10% penalty. On day 61 it automatically becomes a taxable distribution from the IRA and is subject to the 10% penalty. You can still deposit $500 to bring the Roth up to $5,000 after day 60, but you will be out the $50 for the 10% penalty on the $500. Edit: Although you might not be eligible to make direct contributions to the Roth, you still have that 60 day window to complete the rollover distribution/conversion from the Traditional IRA to the Roth IRA. If you are still in the 60 day window, just make sure that the custodian of the Roth flags it as a part of the rollover/conversion to complete it. If you are outside the 60 day window now, you're officially screwed by your mistake. At least the present damage is only $50.