IRA Recharacterization
Does the CARES Act allow for Recharacterization of Roth IRA converted in December of 2019 back into the original IRA?
Context: A client of mine did a 70,000 Roth conversion at the end of last year. His wife had earned income of roughly 11,000 and he started Social Security in July that provided roughly 13,000 for the year. We initiated a 70,000 Roth conversion that triggered about a 25,000 tax (or premium) for health insurance from the affordable care act. Is there anything we can do to help them fix this?
Permalink Submitted by Alan - IRA critic on Wed, 2020-04-22 19:02
No solution unless future relief legislation includes a conversion recharacterization option for 2019 conversions. This would reduce taxes due this year in the same manner as waived RMDs, but would be available to all taxpayers, not just those with RMDs. I don’t know if this form of relief was considered, but obviously it has not been included in any relief bill yet. Of course, if this relief was adopted, then those who converted in Jan and Feb, 2020 would also want to recharacterize.