changing ROTH TO TIRA

Submitted by jorge de leon on Mon, 2014-02-17 21:22

LAST MARCH 29, 2013 I OPENED A ROTH IRA WITH WELLS FARGO BANK. THEN, I DECIDED TO CHANGE IT TO A TRADITIONAL IRA ON APRIL 16, 2013 FOR TAX PURPOSES. IS THIS A CONVERSION OR RECHARACTERIZATION? aNYWAY, TW0 WEEKS AGO, ON FEBRUARY 3, 2014, I RECEIVED FROM WELLS FARGO BANK A FORM 1099-R WITH A GROSS DISTRIBUTION AMOUNTING TO $6000.27 WITH TAXABLE AMOUNT NOT DETERMINED. HOW DO I PROCEED WITH THIS?



Submitted by Alan - IRA critic on Mon, 2014-02-17 23:29

What are the codes in Box 7? Does the 1099R show the Roth IRA account #?  Was this contribution for year 2012 or 2013? This was apparently a recharacterized regular contribution.



Submitted by jorge de leon on Fri, 2014-02-21 19:22

Thanks for helping.    The code on Box 7 :  T;  This was a contribution for 2012.



Submitted by jorge de leon on Fri, 2014-02-21 19:33

The 1099R shows the Roth account number.



Submitted by Alan - IRA critic on Fri, 2014-02-21 20:57

  • This is not good. A recharacterization is a non taxable transfer, but Code T reflects a distribution instead, and not a specific distribution of your 2012 contribution. You may have to report this distribution on Form 8606, but it will probably not be taxable. What year did you make your first Roth contribution? Do you have more than one Roth IRA? Do you still have any Roth balance?
  • Most of the bad news is that since your Roth distribution was not changed by the above distribution, you cannot make a traditional IRA contribution for the same year. But did you?  If so, then you have two contributions for 2012, but you withdrew the Roth contribution in 2013 and that would correct the excess contribution if you actually did have two contributions. But you would owe a 6% excise tax for 2012 on the amount of the Roth contribution.
  • Did you get a Form 5498 showing you made a 2012 TIRA contribution?
  • This is one of those errors that breeds an entire chain reaction of other problems, so will now need this other information to determine exactly where you are now with respect to your 2013 return.


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