Recharacterizations of a deposit awarded in a QRDO
A woman has a Roth IRA as a result of a QDRO in a divorce. All contributions were made in the 2014 year by her ex-husband into his company plan.
The woman has already filed her taxes for 2014, however, the QDRO execution was not finalized until after April 15th so the funds were not in her name until after that. She’s wondering if she can recharacterize these contributions into a Traditional IRA for 2014? Is this allowed? If so, how would you calculate the gains on those contributions? Would you still use Worksheet 1-4 on page 32:
http://www.irs.gov/pub/irs-pdf/p590a.pdf
Thank you
Permalink Submitted by Alan - IRA critic on Sat, 2015-07-18 01:34
Was the qualified plan balance in a pre tax account or a designated Roth account? If they were in a pre tax account, then a qualified Roth rollover was done. These can be recharacterized by the usual extended due date to a TIRA. The earnings would be calculated by the Roth IRA custodian in the usual way and be part of the recharacterization transfer. Worksheet 1-3 would apply if you want to check their calculations.
Permalink Submitted by abura98 on Tue, 2015-07-21 00:01
Hi Alan,The funds not were not in a pre-tax account, but a Roth 401(k) account. In this case, the funds cannot be recharacterized is that correct?
Permalink Submitted by Alan - IRA critic on Tue, 2015-07-21 00:18
Correct, they cannot be recharacterized. Once an elective deferral is made to a Roth 401k, it cannot be recharacterized as a traditional 401k deferral. Permissible transfers of that balance are limited to a Roth IRA or another Roth 401k. Transfer to an alternate payee under a QDRO does not expand or alter those options.