can you convert from roth to traditional?
I have a customer that actually opened the roth for his son-in-law-thinking that he was participating in a retirement plan. He has since found out that he was not and that he needs the tax deduction for 2007. I have never come into this situation, I am not sure if it can be converted to a traditional or not. He knew that there was a conversion to a ROTH, and asked me to find out. All I can find is about converting to ROTH.
Permalink Submitted by Al Fry on Mon, 2008-04-14 16:44
He should be able to recharacterize the contribution to a TIRA, via a trustee-to-trustee transfer. Page 30-32 of IRS Publication 590 explains this.
Permalink Submitted by Alan Spross on Mon, 2008-04-14 21:35
Al is correct.
He has probably extended his 2007 return at this point, but can pay based on the TIRA deduction IF he has either filed a timely return or extension. That would give him to the extended due date of 10/15 to take care of the recharacterization of the contribution. Amounts actually moving to the TIRA would be net of earnings or losses, but he would get the deduction based on the original contribution amount.
When ordering the change, do NOT use the term conversion, but rather ask to have the entire 2007 Roth contribution recharacterized to a TIRA contribution.
Finally, a lower tax bill is surely attractive at this point, however, if he is in a modest tax bracket, the Roth may STILL be the better choice long term, even more so if the contribution has earnings vrs losses.
Permalink Submitted by Al Fry on Mon, 2008-04-14 21:48
Also, be sure he is eligible to deduct the contribution.
Permalink Submitted by Dana Brannen on Tue, 2008-04-15 20:04
I actually figured it out once I got my head out of the TAX fog! I greatly appreciate the answer and I am so glad that I now know somewhere that I can post questions when I do get stumped!