Taxed on recharacterization of my IRAs
In 2009, I converted over 86000 dollars of TIRAs to RIRAs. In 2010 when I was filing my taxes, I found that I made little over 3000 dollars more than I should have to be able to change my IRAs. In March,2010 I changed the RIRAs back to TIRAs but the IRS got the notices from my fund companies that I changed the TIRAs (essentially cashing out). So now the IRS is charging me tax on the funds plus interest and penalty. To correct this error, meaning I don’t owe taxes, do I send copies of my recharacterizations made before April 15 2010 to the IRS to show I really didn’t CASH OUT MY TIRAs? Thanks for the help.
Permalink Submitted by Alan Spross on Mon, 2011-05-09 18:30
Yes, copies of the statements should help, but copies of the 1099R and 5498 forms are more important.
Since you recharacterized the 2009 conversion in 2010, you should have included an explanatory statement with your 2009 tax return because the IRS does not receive the 1099R and 5498 for the recharacterization until late January, 2011, and would not have known of you recharacterization. If the IRS notification came after that date, then they failed to match up the forms properly. You also received a copy of these forms and the 1099R should have code “R” in Box 7. If it does not, then something else went wrong.
Permalink Submitted by Richard Partin on Mon, 2011-05-09 19:51
Thanks Alan for the response. If I don’t have the forms 1099R and the 5498 for each fund, will the fund companies have copies so I can request them?
Permalink Submitted by Alan Spross on Mon, 2011-05-09 22:32
Yes, you can request them. For some firms, you may even be able to download them by logging into your account on their website. These forms apply per IRA account, but if each fund is it’s own separate IRA account, you should get one for each fund that was involved.
If they never issued one in the first place, it raises the possibility of additional complications, the worst of them being that the recharacterization was never completed, however unlikely that is. More likely, they were just misplaced or lost in the mail.