Conversion Taxes
A potential client came to me with this dilemma. They decided to do a ROTH conversion from their IRA. Unknowing to them, they checked the box to withhold 20% in takes. So instead of transferring 10k, only 8k was converted. Conversion was done on April 20. If they rechar the conversion and put the 8k back into the IRA, they will have to come up with the missing 2k and then they can recoup that money when they file their taxes next April. Is that correct?
Permalink Submitted by Alan - IRA critic on Tue, 2013-04-30 16:08
There is no reason to recharacterize unless they do not want to convert at all, as a recharacterization will not pull the 2k back into their TIRA. If they want to convert 10k, they just need to come up with 2k to complete the Roth conversion within 60 days of 4/20. They can re coup the 2k earlier than next spring if they reduce any other withholding or estimates being made this year. Doing that will re coup the withholding gradually starting now.