Keep two things in mind.
1) A recharacterization is done in the Traditional IRA contribution section that says you changed your mind and applied the contribution to a Roth IRA instead. It simply means that the Traditional IRA contribution never occurred but the contribution was to a Roth IRA instead. Only the trustee of the Traditional IRA can preform the recharacterization. HOWEVER, if your Traditional IRA deductions are limited by your MAGI, then probably your MAGI is too high to even make a direct Roth contribution.
2) Hence, this is where the "backdoor Roth" comes up. A Backdoor Roth is a way to make a NON-DEDUCTIBLE Traditional IRA contribution and then to immediately convert the Traditional IRA to a Roth IRA so that the non-deductible distribution from the Traditional IRA offsets the tax on the Roth conversion thus gets the money into the Roth just as if you made a direct Roth contribution (that you cannot)
There is a HUGE pitfall to this if you have any existing Traditional, SEP or SIMPLE IRA accounts.
This so-called “back-door Roth” method ONLY works if you have NO OTHER Traditional IRA accounts. If you do, then the non-deductible part must be spread (prorated) over ALL accounts and cannot be withdrawn by itself. Only if you started with NO Traditional, SEP & SIMPLE IRA and ended up with a zero amount in ALL Traditional, SEP & SIMPLE IRA accounts will this Roth conversion not be taxable.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
