O'Reilly logo

J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return by J.K. Lasser Institute

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

8.22 Recharacterizations and Reconversions

When you convert a traditional IRA to a Roth IRA (8.21), you have an opportunity to reconsider the move. You can in effect “undo” the conversion by recharacterizing all or part of it. If you timely file your return for the year of the conversion, you have until October 15 of the following year to complete a recharacterization; see below for deadline details.

You may want to recharacterize because the value of the Roth IRA has dropped substantially since the conversion, and you do not want to pay the tax that would be due on the higher value at conversion, or you may simply be unable to pay the tax due on the conversion (8.21). In a declining stock market, a recharacterization may be the first step in a plan to reconvert back to a Roth IRA when the taxable conversion value is lower, subject to the waiting period for reconversions (see below).

You make an election to recharacterize the conversion by making a trustee-to-trustee transfer of the Roth IRA contribution (part or all) to a traditional IRA; it does not have to be the same traditional IRA from which the conversion was made. You can also recharacterize by keeping the account with the same trustee and notifying the trustee to transfer the account to a traditional IRA. The transfer must include any net income allocable to the contribution being recharacterized. If there has been a loss in value since the conversion, the allocable negative net income reduces the amount that must be recharacterized ...

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required