Rechar TIRA contrib to Roth and back to TIRA?
I have consulted with 2 different tax preparers and am getting what I think is wrong info on this situation.
Last year I contributed 5,000 to a TIRA at Vanguard. I called in Dec and had them rechar the TIRA to Roth (thought I’d be under the income limits). I called a couple days later and had them rechar the Roth back to TIRA (forgot about some income and realized I’d be over Roth income limits). I got a 1099-R for both rechars and both have a box 7 code of “N” which should be correct for rechars. I was dealing strictly with annual contributions, no conversions.
Is this OK? Reading post https://irahelp.com/forum-post/18053-recharacterization-contribution it sounds like I should not have been able to rechar back due to IRS Reg 1.408A-5, Q-4.
How can I fix this?
Permalink Submitted by Alan - IRA critic on Mon, 2013-03-25 19:21
Your reference is correct. The custodian should not have allowed the second recharacterization. First, try to get the custodian to correct this by recharacterizing back to a Roth again and rescind the 1099R reporting the second recharacterization. Good chance they won’t do this even after reviewing your IRS Regs reference. If they don’t, you could request a return of your contribution with allocated earnings, which you would have to do anyway if they restored the Roth contribution that your income was too high to make. This would leave you with no contribution for 2012 to report on your return, and tax and penalty on the earnings generated on the contribution. You would also have to make a complete explanatory statement with your 2012 return explaining both recharacterizations and why you decided to request the return of contribution.