Full recharacterization Roth to Traditional? Any impacts? What forms do I need?

Forum|Forum|7 years ago
June 5, 2019
2 replies
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I opened a Roth IRA in 2016 and funded it with $3,600.

I did not make any additional deposit afterward.

I did not fill my taxes yet.

Can I recharacterize it to a Traditional IRA? What are the impacts? Any fees/penalties? How do I handle that in my tax return? Should I just declare the contribution of $3,600 to a Traditional IRA and not even mention that it was first a Roth IRA contribution?

What forms should I request from my IRA custodian to make sure everything is in order?

Thanks

Anonymous

If you re-characterize your return this year you will not have any penalties. The restrictions are placed on (re)re-characterizing it to a Roth IRA from a Traditional IRA. If you re-characterize now, you will not receive any paperwork relative to the move until next year.

Roth IRA contributions are not reported on your Tax Return. You do not report any activity from your Roth until you withdraw funds. This is the case whether or not it is a planned distribution or an early distribution.

For more information regarding Roth IRA Rollovers please click on the link below:

https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras-recharacterization-of-roth...

Mike8Author

Level 4

Thank you for your response. I am confused, though. I found Forms 8606, 5498 and 1099-R in my search about recharacterization and IRAs. Do I need to deal with any of these forms in my case? I would like to convert the $3600 funded to a Roth IRA into a Traditional IRA. Since I did not file my 2016 return yet and the contribution was made in 2016, I thought this would be a simple process. After I ask my IRA custodian to do it, what do I have to do for my 2016 tax return? Will there be anything to do next year for my tax return 2017?

macuser_22

Alumni - Champ

To report the recharactorization:

Enter the Roth contribution into the IRA contribution section and say that you changed your mind and moved it to a Traditional IRA (recharactorized) and if asked that you want it all to be non-deductible. The amount recharacterized would be the amount of the Roth contribution - not any earnings. Enter an explanation statement of the amount recharactorized and earnings if any. That will create a 8606 form that will track the non-deductible basis of the non-deductible contribution.

You should receive a 1099-R next year with a code "R" in box 7. That only reports the recharacterization to the IRS and is ignored if entered into TurboTax.

Enter IRA contributions here:
Federal Taxes,
Deductions & Credits,
I’ll choose what I work on (if that screen comes up),
Retirement & Investments,
Traditional & Roth IRA contribution.

OR Use the "Tools" menu (if online version under My Account) and then "Search Topics" for "ira contributions" which will take you to the same place.

**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.**