Recharacterization Deadline

Submitted by IRAQuestion5 on Mon, 2022-07-11 21:04

Hello-

A Roth IRA contribution for 2021 can be recharacterized to a Traditional IRA contribution prior to the extension deadline even if an extension was not filed correct? In other words, even if the 2021 return was filed in March with no extension a recharacterization can be done but an amended return would have to be filed?

Thank you!



Submitted by Alan - IRA critic on Mon, 2022-07-11 21:52

  • Yes, the 10/17 extended due date applies for recharacterizations of 2021 contributions or return of excess contributions as long as either a timely extension was filed OR the 2021 return was filed by the 4/18 deadline. 
  • Filing the 1040X is required according to Pub 590 A, but the deadline for that is the usual 3 years for amending a return. However, in order to advise the IRS that a recharacterization has been done prior to their receiving the recharacterization 1099R, the 1040X should be filed shortly after the recharacterization is processed. That allows the IRS to disregard the 5498 they received showing a different type of contribution, although the IRS rarely contacts taxpayers that soon after the 5498 filing in May. The 1040X also has a box to explain why the 1040X is being filed as well as providing the explanatory statement outlining the amounts and dates of the recharacterization and contribution being recharacterized, since the original return likely did not provide such an explanation. The 1040X should also include the statement “filed pursuant to Sec 301.9100-2” that effectively states to the IRS that the taxpayer has met all the timing and other requirements for use of the extended due date.
  • To be clear, not filing a 1040X usually does not invalidate the recharacterization but the IRS could technically do so , and it just makes it difficult for the IRS to piece together the 5498 and 1099R forms. 


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