Roth re-characterization
My client over contributed to her Roth IRA for 2007. Her accountant discovered it when doing her taxes. They went ahead and filed and I set about recharacterizing the funds after April 15 believing we had until October 15 to do so. Her accountant is now saying she owes a penalty because I did not recharacterize by April 15.
My understanding is that as long as she filed on time (by April 15) we have until October 15 to recharacterize. Am I correct?
Permalink Submitted by Clyde Wolf on Tue, 2008-08-26 20:26
After making an excess contribution to a ROTH IRA, the excess contribution and gains must be removed before the due date (including extensions) for filing the tax return for the year. This is considered an amount not contributed.
Earnings must on the excess contribution must be withdrawn also.
The earnings are considered earned and received in the year the excess contribuiton was made.
You may be able to make the excess contribution part of the 2008 contribution.
Permalink Submitted by Alan Spross on Tue, 2008-08-26 20:37
Ann,
You do have until October 15th. There is an automatic extension if the taxpayer either files on time or files for a timely extension.
If the Roth contribution is going to be recharacterized to a TIRA contribution an amended return will be needed to claim the deduction if allowed, and if not allowed then an 8606 needs to be filed to show the non deductible contribution. An explanatory statement explaining the contribution and recharacterization should be attached to the amended return or the 8606.