IRA contribution recharacterization
Hello,
I have a client who contributed $6,000 to an IRA in 2011. Her husband did the same. They filed an extension on their taxes and have not yet filed for 2011. They have received form 5498 from their IRA custodian.
Her accountant contacted me and asked that I have the custodian recharacterize the IRA contributions to Roth IRA contributions for 2011 because there is really no benefit of a tax deduction due to their income being around $13,000 for 2011. They had expected their income to be much higher for 2011.
Is it possible to recharacterize a contribution? if so how can I explain it to the custodian so that they will accept the request to do so.
Thank you very much for your insight and expertise!
Permalink Submitted by Alan Spross on Fri, 2012-06-08 17:01
Yes, these contributions can be recharacterized as 2011 Roth IRA contributions up to 10/15/2012 providing the 2011 extension was filed on time (by 4/18). The 10/15 date is the extended due date for 2011 and can be used to recharacterize contributions or conversions.
When the return is filed it should include an explanatory statement regarding the recharacterized contributions so the IRS will know that the 5498 no longer is correct. Just tell the IRA custodian that the clients qualify for the extended due to recharacterize and it should not be a problem.
NOTE: Above conditioned by their joint modified AGI not exceeding 169k.