Roth recharacterization
individual Made Roth contributions through out the year in 2018. When CPA was doing their 2018 taxes in early 2019 she told individual you made too much to make full Roth ira contributions. Individual immediately called the custodian and had them recharacterize the excess amount to traditional IRA. Individual received form 5498 in 2020 showing the recharacterization to traditional IRA they had done in 2019 for tax year 2018.
Individual received a letter from the IRS stating they don’t show individual made a traditional IRA contribution in 2018 (the recharacterization) so they owe $2,600 (total for individual and spouse). CPA sent in 5498 but client recently received another letter from the IRS stating they still owe $2,600.
Any thoughts?
Permalink Submitted by Alan - IRA critic on Fri, 2021-03-26 18:28
The IRS usually uses the 1099R to compare with tax reporting. The individual should have received a 2019 1099R for the Roth IRA in January, 2020 coded “R”, and the CPA should also have included an explanatory statement with the 2018 return about the Roth contribution and recharacterization to TIRA. That said, why would they owe this much,? Was a TIRA deduction claimed on the 2018 return that the IRS is denying. If either spouse was covered by a workplace plan in 2018, there is no deduction allowed when MAGI is too high for a Roth contribution.
Permalink Submitted by Don Warnke on Fri, 2021-03-26 18:51
yes the CPA claimed the deduction for TIRA contribution in 2018 due to recharacterization. they individual and spouse do not have access to employer sponsored plans.