Recharacterization and RMD’s
While I may be wrong I have seen nothing in Pub. 590 suggesting an age limit for recharacterization of IRA’s (ROTH back to traditional.) While it is not an issue this year, I am wondering if their is a preferred distribution method when and individual of RMD age decides to recharacterize.
Would it be best to recharacterize an amount by an amount that is the total less the RMD amount and somehow classify it as a distribution? If money is left in a ROTH or withdrawn I don’t see where the distribution would be. I only see a clean line when recharacterizing the total amount and then taking the proper RMD distribution after the recharacterization.
Erick
Permalink Submitted by Alan Spross on Mon, 2009-08-24 21:07
Not sure if I follow the exact type of recharacterization you are contemplating. However, once a taxpayer enters the first RMD distribution year (even prior to the RBD date), all distributions are first deemed to be applied to the RMD. This means that if a Roth conversion is planned, the taxpayer must first distribute the RMD, and then do the conversion with a second distribution. In that case, any decision to recharacterize the conversion does not affect the RMD at all. There is no age related rule regarding recharacterizations since none are needed.
I assumed you were referring to Roth conversion rechacacterizations rather than regular contribution recharacterizations, since no TIRA contributions are allowed once taxpayer reaches the first RMD year, while Roth contributions can be made but there is no Roth RMD.
Or perhaps, you are concerned how to correct the error of converting first, which probably happens quite often, but the IRS would not normally know because actual dates are not included in the 1099R and 5498 reporting procedures. That would not be a problem in 2009 because RMDs for 2009 have been waived.