Recharacterization Reversal
Hello,
Last year i put in a contribution into Roth ira for 5500 and it turned to 230,000, My income limits exceeded the eligibility this year. So at that point i thought i was in eligible and did a recharacteriztion to Traditional IRA.. While the paperwork was being done by broker, I found later, i would be better off keeping it in the Roth IRA and paying a Penalty on contributions of 6% (330).. I called the broker yesterday/and emailed insisting on canceling this process. The right people to do this had already left for the day as this was 7pm at night. I woke up this morning all the funds have been moved into a Traditional IRA, i guess it was an overnight batch process that was set off. Talked to broker, sent a notarized letter via fax saying i made a mistake and would like this reversed as this action never happened. The broker is still waiting on the clearing house to see if it can be done. Im a little concerned here obviously the cost of this mistake is huge if i cannot get it back to the roth IRA.. So if they cannot reverse this action.. what is my recourse? Can recharacterize the recharacterization?
Permalink Submitted by Alan - IRA critic on Thu, 2014-03-13 16:04
I am same person who addressed your question at other forum. A recharacterized regular contribution cannot be recharacterized back to it’s original character. Convincing the custodian to void the first recharacterization is your only chance and the chances of that are very small unless they messed up something in the process. Small comfort, but you should file an 8606 reporting your TIRA contribution as non deductible (assuming you cannot deduct it). Conversion back to a Roth would of course be mostly taxable due to the large profit that is now treated as if it occurred in the TIRA, not the Roth.