over my roth ira income limit

Thanks to two relocations in 2006, as well as a signing bonus, a merit bonus, a raise and a salary adjustment, I was in for a shocker when I received my W-2 a week and a half ago.

Since I'm single (woe), my ability to contribute the full amount allowed ($4k) for a Roth IRA begins to phase out when my "modified adjusted gross income" reaches $95k. Don't ask me what modified adjusted means, but the amount I'm over is high enough that it doesn't really matter. What stinks is that so much of my "income" from last year was imputed

Merriam-Webster's Dictionary of Law

Main Entry: im·pute
Pronunciation: im-'pyüt
Function: transitive verb
Inflected Forms: im·put·ed; im·put·ing
1 : to consider or calculate as a value or cost (as for taxation); broadly : to reckon as an actual thing <impute a benefit from the use of the car>

from relocation costs and benefits like free gym membership (it was a very nice and large gym). It wasn't really money in the bank, so to speak.

Anyway, so right after the new year, I had put in $4k as a contribution to my Roth IRA, and attributed it to 2006. I also set up regular investments of $333.33 into my account, for my 2007 contribution. Then, like I mentioned, I received my W-2 and nearly had a heart attack.

Now that I'm calmer, I realize I will need to recharacterize my 2006 contribution. I'm hoping I won't need to do anything with the 2007 contributions (since my salary plus any expected raise/bonus should still keep me underneath the income limit), but we'll see. Thankfully, my faithful reading of other personal finance bloggers yielded a nice suggestion on recharacterizing.

I took the first step today by emailing Fidelity, and asking them if its possible (I'm assuming it is, but I'm just hoping that they'll say, "Oh, sure, easy as pie"). I'll keep you updated on this process. Hopefully, I will stay underneath the income limits another couple of years so I can take advantage of the Roth's tax-free benefits. Worst case, I'll just throw my money into a non-deductible traditional IRA, and convert it in 2010 to a Roth. Assuming I don't qualify income-wise, which would be great news. ;)