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Old 06-21-2012, 04:43 PM
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Join Date: Jun 2012
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Help!! Recharacterize IRA Question

My situation:
In April 2012, I made a $2000 contribution to my Existing Traditional IRA account. I also got a 6 month extension to file taxes.

Now, while doing my taxes, I realized that I will not be able to take a deduction for this contribution. However, I can contribute upto $5000 to my Roth IRA so I asked my fund company to re-characterize my contribution of $2000 to Roth IRA (I have an existing Roth IRA with same company). Of course, I have funds in these accounts from contributions made in the past.

Went thru 8606 instructions. On page 3, rec-characterizations, Example 2 relates to something similar except the fact that the example mentions a new Traditional IRA in which contribution is made whereas I made my contribution in an existing IRA account.

Do I just submit a statement or do I need to file 8606?



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Old 06-22-2012, 03:11 AM
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Join Date: Oct 2010
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“Of course, I have funds in these accounts from contributions made in the past. Went thru 8606 instructions. On page 3, rec-characterizations, Example 2 relates to something similar except the fact that the example mentions a new Traditional IRA in which contribution is made whereas I made my contribution in an existing IRA account. Do I just submit a statement or do I need to file 8606?”---->You may choose to recharacterize your traditional IRA contribution as you are ineligible to receive a deduction for the contribution and feel it is then better to treat it as a Roth IRA contribution , for which earnings accrue on a tax-free basis. Alternatively, you may recharacterize a Roth IRA contribution to a Traditional IRA contribution in order to claim a tax deduction for the amount, or because you are ineligible for the Roth IRA contribution. Some financial institutions will process the recharacterization by simply changing the IRA from one type to another. Check with your IRA custodian/trustee about their procedure and any documentation requirements for processing a recharacterization. The general process for recharacterizing a Roth is fairly straightforward. Most financial services firms have their own forms for recharacterization that you can use to start the process. If not, simply write a letter instructing the firm to recharacterize your original transfer. The process becomes a little more complicated if you earned any income on the amount you converted, as the IRS requires you to withdraw earnings on any converted funds during a recharacterization. In this case, you must report the earnings in your net income on your tax return. Whether or not you have earnings associated with your recharacterization you must report the transaction to the IRS using Form 8606.



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Old 06-27-2012, 02:07 AM
leowlerkurt
 
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Quote:
Originally Posted by nkaufman View Post
My situation:
In April 2012, I made a $2000 contribution to my Existing Traditional IRA account. I also got a 6 month extension to file taxes.

Now, while doing my taxes, I realized that I will not be able to take a deduction for this contribution. However, I can contribute upto $5000 to my Roth IRA so I asked my fund company to re-characterize my contribution of $2000 to Roth IRA (I have an existing Roth IRA with same company). Of course, I have funds in these accounts from contributions made in the past.

Went thru 8606 instructions. On page 3, rec-characterizations, Example 2 relates to something similar except the fact that the example mentions a new Traditional IRA in which contribution is made whereas I made my contribution in an existing IRA account.

Do I just submit a statement or do I need to file 8606?
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