Calculating RMD after recharaterazation
If you recharacterize a ROTH Ira back to a regular IRA how do you compute the RMD? Do have to look at the values on December 31st of the prior year or do you use the value when the account was recharacterized? When do you have to take the RMD?
Permalink Submitted by Alan Spross on Fri, 2011-10-14 17:15
If a Roth conversion done in a prior year is recharacterized, the 12/31 TIRA balance must be increased by the amount that transfers back to the TIRA, even though that amount may be quite different than the conversion value back on 12/31. This avoids trying to do an earnings calculation back to that 12/31 date since many people convert into an existing Roth account and the value of that account immediately after the conversion would need to be determined and compared with the year end balance. The current IRS Regs eliminate this calculation. Using the amount actually transferred in the recharacterization will also agree with the 1099R reporting the recharacterization issued the following January.
For a recharacterized 2010 conversion, the last date to complete that would be Monday 10/17/2011. The statement showing the recharacterization would be the 10/31 statement. The amount showing as transferred in the recharacterization would then be added to the actual 12/31 balance for any remaining TIRA accounts on that date. The RMD must then be completed using the adjusted 12/31/10 balance by 12/31/2011.