Limits on recharacterizations
A gentleman did the following in the 2014 calendar year
1) Deposited to Traditional IRA
2) Convert those funds to Roth
3) Undid the conversion
Now the customer wants to recharacterize BACK to Roth.
In this case, IRS FAQs state that:
“Is there a minimum waiting period to reconvert the money to a Roth IRA following a recharacterization?
Yes, if you recharacterize all or part of a rollover or conversion to a Roth IRA, you cannot reconvert the amount recharacterized to the same or another Roth IRA until the later of:
* 30 days after the recharacterization, or
* the year following the year of the rollover or conversion.”
Source: http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-IRA-Contribution-Limits
The original conversion took place on 08/11/2014, so it has been past 30 days and is now the following calendar year, so he’s okay to reconvert. However, is he okay to recharacterize again? Is this allowed? I don’t see any literature claiming otherwise but I wanted to double check.
Thanks
Permalink Submitted by Alan - IRA critic on Wed, 2015-02-18 04:02
Due to lack of clarity on this question, the final decision will rest with the custodian. If the custodian processes a recharcterization of the regular TIRA contribution as a Roth contribution, the IRS is not likely to object since all earnings on the contribution will accompany that recharacterization. However, many custodians will resist processing the recharacterization because the TIRA was last created by a tax free transfer from the Roth and tax free transfers are not supposed to be eligible for recharacterization. Good chance the IRS was so focused on disallowed reconversions that they did not anticipate this fact pattern.
Permalink Submitted by abura98 on Wed, 2015-02-18 16:06
Thanks very much! That’s very helpful