5 Easy Steps to a Roth IRA Recharacterization

What is a Roth IRA recharacterization?

Roth IRA recharacterizationIn the simplest of terms, a Roth IRA recharacterization is an “undo.”  It erases a Roth IRA conversion, and the conversion is treated as if it never occurred.

1.  Meet the deadline.   A Roth IRA conversion can be recharacterized until October 15 of the year after the calendar year of conversion. That means that either a January 1, 2017 or a December 31, 2017 conversion can be recharacterized through October 15, 2018. If you miss the October 15 deadline, the only way to get an extension is to go for a private letter ruling from the IRS.

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Roth IRA Recharacterization: 11 Things You Need to Know at Tax Time

What is a recharacterization of a rollover or a conversion?

Roth IRA RecharacterizationA recharacterization allows you to “undo” or “reverse” a rollover or conversion to a Roth IRA. You generally tell the trustee of the financial institution holding your Roth IRA to transfer the amount to a traditional IRA (in a trustee-to-trustee or within the same trustee). If you do this by the due date for your tax return (including extensions), you can treat the contribution as made to the traditional IRA for that year (effectively ignoring the Roth IRA contribution).

1.  It is not too late to recharacterize a Roth IRA conversion done in 2016.

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