Roth recharacterization and conversion timing
Hello,
I would like to do a recharacterization of a Roth conversion I did in 2009 prior to the Oct 2010 deadline for filing my 2009 extended 1040. Will this prevent me from doing another Roth conversion in 2010, from either the same or different TIRA account…? Thanks…!
Permalink Submitted by [email protected] on Mon, 2010-08-09 17:56
Oops…. Perhaps I should ask a futher question and maybe simplify my 2009 1040 filing, which I haven’t done yet.
I did the Roth conversion in December 2009. Since the account now has serious losses, would like to recharacterize.
What is the simplest way to file the combination conversion/recharacterization…? I’m wondering if it’s possible to avoid filing the 8606 at all, since the rechar wipes out the conversion in the same filing….? Thanks…!
Permalink Submitted by Alan Spross on Mon, 2010-08-09 19:47
No, you will still be able to reconvert in 2010. If you are reconverting the same amount you must wait until the 31st day following your recharacterization. You do not have to wait until 2011 since your original conversion was done in 2009.
But if you can show that you had other TIRA assets all along you can convert a different amount, ie different assets than the funds emanating from your recharacterization, whenever you wish without any waiting period. Generally, this means that if you are doing small incremental conversions from your TIRA, there will not be a waiting period. But if you convert most or all of your TIRA, then a reconversion would involve some of the “same amount” and trigger the waiting period.
You are correct that if you do a full recharacterization of your conversion before 10/15, there is no need to file the 8606 for 2009. But the IRS does ask for an explantory statement outlining the date and amount of your conversion and the date and adjusted amount of your recharacterization. They need this because they will not know of your recharacterization until Feb, 2011, and without the explanation they will initially assume that you failed to report the conversion.