Recharacterizations
I have a client who this past year (2016) put money into a Roth IRA. As the 2016 year was coming to a close, she discovered she was making too much money as a single person to contribute into a Roth. She called me, and we had her contributions re-characterized into a non-deductible IRA. My question is, since the money was first deposited into a Roth IRA, can she now convert the money in her non-deductible IRA back into a Roth IRA?
Thanks for any replies to my question!
Permalink Submitted by Alan - IRA critic on Mon, 2017-07-10 02:05
Yes, she can convert her TIRA money to a Roth IRA, however the pro rate rules apply. SInce her recharacterized contribution was not deductible, she needs to file Form 8606 with her 2016 return to report the contribution as non deductible. When she converts this TIRA basis is pro rated with all of her non Roth IRA balances to determine the taxable amount of the conversion. If this was her only non Roth IRA balance, her conversion will be non taxable with the exception of any earnings that increased her TIRA value above the amount of her contribution. The conversion will be reported on Form 8606 with her 2017 return.