recharacterization deadline 2021
Client has excess Roth contributions for 2020. Was the Roth rechar deadline also extended until May 17th?
thank you!
Client has excess Roth contributions for 2020. Was the Roth rechar deadline also extended until May 17th?
thank you!
Permalink Submitted by Alan - IRA critic on Wed, 2021-03-31 01:55
Yes, but many recharacterizations are done by the “extended due date” which is 10/15. The client will be able to use the extended due date if either the return is filed by 5/17, or an extension is filed by 5/17. OF course, when the return is filed first, recharacterization may result in an amended return.
Permalink Submitted by Connie Horstkotte on Wed, 2021-03-31 03:54
Thank you again Alan. because she doesnt have a retirement plan at work, the recharacterization from Roth to Trad will be deductible instead. made too much money for any Roth contributions. does it make a difference if client does it by 5/17 or 10/15?
Permalink Submitted by Alan - IRA critic on Wed, 2021-03-31 12:05
It is somewhat easier to file if the recharacterization is done before the return is filed to prevent having to amend the return, since the return should include an explanatory statement regarding the contribution and recharacterization including amount transferred. But if the return is going to be extended anyway, the recharacterization could be done just before the return is filed. Would never recommend doing this too close to the deadline (either one), or it may not get completed by the custodian. Finally, since you indicated the contribution after recharacterization to TIRA will be deductible, that also indicates that client is not filing jointly with a spouse who IS covered by a workplace plan.
Permalink Submitted by Connie Horstkotte on Wed, 2021-03-31 14:06
You’re correct Alan, she’s filing head of household/single. Thank you and appreciate your prompt response and insights in this forum.