Failed Roth conversion: IRS notification
How soon can I expect a letter from the IRS if one of my TIRA – Roth conversions failed? Shortly after they process my 2008 return, or in the future if I’m audited? If immediately then, will I automatically get a refund on the taxes I paid for the conversion or will I have to file an amednded return? Sometime in the future if I’m audited?
Permalink Submitted by mk foss on Thu, 2009-01-29 17:57
We have not seen a lot of IRS activity in the Roth conversion area. The private letter rulings issued when people request time to undo the failed conversion ,grant additional time when the taxpayer reports the situation before the IRS discovers it. If you read those rulings, IRS seems not to discover it even in cases where the 100k limit was exceeded because not all 1099 income was reported in the year of conversion.
You will need to file an amended return to get the excess tax back.
Permalink Submitted by Jane Young on Tue, 2009-02-03 19:08
I never really understood about the different IRAs and basically just went with what my accountant set up years ago ROTH. I never realized there was a maximum income cap and from 2004-2008 I exceeded this due to a bonus payment.
My financial planner caught this last year and was able to recharacterize my 2007 and 2008 annual IRA contributions from ROTH to Traditional IRA.
However she said she is unable to help me for 2004, 2005, 2006, 2007. It seems since years have passed I cannot recharacterize but instead need to pay penalty for “excess contribution” How do I do this – who do I call and will this lead to me being audited? thanks for advice.