Can I convert recharacterized earnings?
I believed I would be able to directly fund my Roth in 2014, however, after contributing $1750 I realized my income woulnd not all this and I would need to make a non-deductible IRA contribution and then convert it to a Roth. I just recharacterized the $1750 plus the $234 in earnings to an IRA. Now I want to convert this back to the Roth but I’m not sure if I can include the earnings in this conversion? Can I only do the $1750 with the understanding I need to take the $234 as a distribution if I don’t want to keep the $234 IRA open all year?
Permalink Submitted by Alan - IRA critic on Tue, 2015-02-03 16:17
You can convert as much or as little of the IRA balance as you wish. If you convert the entire IRA, 234 of that conversion will be taxable because your 8606 will only show your basis as the 1750 you contributed. If you convert half the IRA, then 117 will be the taxable amount per the pro rate rules. Note that these figures assume that you have no other non Roth IRAs such as rollover IRAs, SEP, or SIMPLE IRAs. There is no waiting period to do this conversion.
Permalink Submitted by David White on Tue, 2015-02-03 21:12
Thank You. . . appreciated!