recharacterize IRA contribution to Roth contribution followed by Roth conversion

Dear Alan et al,

I have a client who mistakenly made a non-deductible Traditional IRA contribution in Jan 2020 for the 2020 tax year. We would like to:

1. Recharacterize this $6K contribution to a Roth IRA contribution for 2020

2. Convert her remaining $22K pre-tax IRA balance over to her Roth IRA

My understanding is that, after Step #1 we’re free to move forward at any time with Step #2 and she would owe tax on the remaining $22K.

Does that sound right to you?

Thanks in advance,

Chris



Yes, but be sure her income is not too high for a regular Roth contribution.  Recharacterization will result in treating any gains on the 6000 contribution as Roth gains, and will also result in the contribution being a regular Roth contribution that can be withdrawn anytime without tax or penalty. Therefore, doing this in two steps as you indicated is preferable to omitting Step 1 and just converting the total IRA balance to Roth.

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