Converting re characterized funds
In 2016 I contributed $5500 to my Roth IRA and on Jan 15th I contributed $458 (2017 contribution). Shortly after Jan 15th I did my taxes and realized I exceeded the Roth income limits and I know I will exceed them for 2017. I had all of the 2016 contribution and the $458 2017 contribution re characterized into a Traditional IRA.
My question is when can I convert these funds back into my Roth? Looking at the IRA FAQs it looks like I have to wait 30 days or the next year whichever is greater? Is that correct? Does that mean I have to wait till 1 Jan 2018? Assuming I max out at $5500 in 2017 contributions into my traditional IRA on 1 Jan 2018 can I convert all $11000 to the roth?
For ease I am ignoring gains…
Permalink Submitted by Alan - IRA critic on Fri, 2017-02-03 17:15
There is no waiting period to convert because you did not recharacterize a conversion, just a regular contribution. Remember that if you have any pre tax TIRA amounts, the conversion will be mostly taxable. You also need to file Form 8606 for 2016 to report non deductible contributions (also for 2017). Also, if your original contribution has investment gains between the time of the Roth contribution and the conversion back to the Roth, the gains will be taxable. Finally, you should include an explanatory statement with your 2016 return indicating the date and amount of your original Roth contribution, date and amount of the recharacterization, and the value of the 2016 contribution that transferred to the TIRA. You will not get a 1099R for this recharacterization until Jan, 2018 but it will be coded to apply to 2016.