dmertz
Level 15

Retirement tax questions

It's a bit obscure.  CFR 1.408A-5 Q&A-4 says:

 

Q-4. Can an amount contributed to an IRA in a tax-free transfer be recharacterized under A-1 of this section?

A-4. No. If an amount is contributed to the FIRST IRA in a tax-free transfer, the amount cannot be recharacterized as a contribution to the SECOND IRA under A-1 of this section. However, if an amount is erroneously rolled over or transferred from a traditional IRA to a SIMPLE IRA, the contribution can subsequently be recharacterized as a contribution to another traditional IRA.

 

In this case, the FIRST IRA is the traditional IRA that received the recharacterization contribution and the SECOND IRA is the Roth IRA.  The first recharacterization was performed as a nontaxable transfer of funds to the traditional IRA, so it would seem that those funds are not eligible to be recharacterized back to a Roth IRA.

 

IRS Pub 590-A says:

 

Election can’t be changed. After the transfer has taken place, you can’t change your election to recharacterize.

 

Re-recharacterizing would move the same amount back as would revoking (changing) the election, so they seem to be the same thing.

 

Still, I've heard of custodian's allowing it, but it's not the custodian's responsibility to enforce the law.  It's the IRA owner who must follow the law.