Recharacterization
I have a question about recharacterization. If you take the option to pay the taxes on a conversion over 2011-2012 can you still recharacterize if the value falls? I read somewhere that you could only do this if you paid the taxes the year you convert to Roth.
Permalink Submitted by mk foss on Tue, 2010-01-05 21:32
Reporting the income (and paying the tax) in 2011 and 2012 is the default method – a timely recharacertization will reduce or eliminate the Roth conversion income paid in those 2 years.
Paying the tax with the 2010 return is the option and must be elected. Recharacterizing on a timely basis also will reduce or eliminate the income subject to tax for 2010.
Permalink Submitted by Alan Spross on Tue, 2010-01-05 21:58
Considering that the extended due date of 10/17/2011 is the deadline for both the recharacterization decision and the election decision on when to report the income that remains, a taxpayer has even more flexibility than in other years to combine these elections to their advantage after knowing their entire 2010 tax situation and much of their 2011 situation including increases in tax rates that might apply to 2011 and 2012.