Roth recharacterization
Roth contribution was made in April of 2024 for the prior year (2023 tax year). Client changed mind, wanted it to be traditional. Contribution was recharacterized to a traditional Ira.
client received 1099r in 2024 Showing this transaction.
does the recharacterization count for a traditional Ira 2023 contribution or will the client need to amend their tax return because it did not count for 2023? Client filed tax return for 2023 stating they made a traditional Ira contribution for 2023.
Permalink Submitted by Alan - IRA critic on Wed, 2025-04-09 13:05
It’s a 2023 TIRA contribution that is either deductible or non deductible and the 2023 tax return will indicate which. If it does not, then it needs to be amended.
If non deductible, it must be reported on Form 8606.
The recharacterization is not reported on the 2024 return. The 1099R should be coded R, which indicates that the 2023 contribution was recharacterized.
Permalink Submitted by Michael S on Wed, 2025-04-09 13:17
The transaction was submitted on 4/10/23 but the custodian did not process until after tax filing deadline. I’m assuming there’s nothing we can do?
Permalink Submitted by Alan - IRA critic on Wed, 2025-04-09 13:38
You indicated that the client received a 2024 1099R reporting a recharacterization, so it was processed. What is the code in Box 7? Were the funds actually transferred to the TIRA account?
A 2023 contribution can be recharacterized up to 10/15/2024 if the client either filed their 2023 return or an extension by 4/15/2023.
What transaction was submitted on 4/10/23? Do you mean 4/10/2024?
Permalink Submitted by Michael S on Wed, 2025-04-09 13:50
Sorry, we submitted the paperwork to our custodian on 4/10/24. The client filed their 23 tax return on 4/15 stating they made the max traditional Ira contribution (this was the recharacterization). However, the actual recharachterization did not take place until 4/24/24.
Permalink Submitted by Alan - IRA critic on Wed, 2025-04-09 14:31
That does not matter. The recharacterization was done prior to 10/15/2024, so all is OK.
The 1099R was issued confirming that the recharacterization was processed and the IRS received their copy as well.