2020 Roth Contribution Recharacterization
I have a client that made a $6,000 Roth contribution for 2020 but we just found out that their MAGI falls within the Roth income phaseout. Their estimated reduced Roth contribution limit is around $4,000. Is it possible to do a recharacterization of only the $2,000 excess Roth contribution?
Additionally, they were adding monthly last year. Can we simply use the last four months of contributions (4 X $500 = $2,000) for the calculation of net income attributed to the contributions?
Permalink Submitted by David Mertz on Mon, 2021-02-01 22:57
Yes, partial recharacterizations of contributions are permitted.
Yes, with the recharacterization consisting of just the last 4 contributions, the computation period for the net income attributable would begin immediately prior to the deposit of the first of these 4 contributions.
See CFR 1.408-11 for the full details of the calculation: https://www.law.cornell.edu/cfr/text/26/1.408-11