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I accidentally over contributed $25 to my traditional IRA last year giving a total non-deductible contribution of $5025. This was then converted along with all my traditional IRAs into Roth IRAs in 2010.
Can I make a 2011 contribution of $25 to my traditional IRA (so it no longer has a zero balance) and use that to fund the removal of excess $25 contribution from 2010? Or must I instead back out the Roth conversion via a recharacterization in order to fund the removal of excess contribution?
I'd call the IRS to be sure. but if you can unwind this before your taxes are due you won't owe the 6% tax on your excess contribution.
Here's the IRS page with this information. (Under Excess Contribution Tax.) I couldn't find a direct answer to your question.
If this is impractical then you can also (I believe) contribute $25 less than you're allowed to in 2011 to the appropriate IRA, and you're clean. You will owe an extra $1.50 in taxes, though.
But call the IRS. They've been very helpful to me the times I've called.
Two steps - paperwork to recharacterize the $25 to traditional, then withdraw that $25.
