TurboTax FAQ
TurboTax FAQ
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What's the difference between a conversion and a recharacterization?

Taxpayers can move all or part of their their traditional IRA balance to a Roth IRA. These conversions are treated as a rollover, moving an amount from one retirement account to another, except a conversion to a Roth IRA has an impact on your taxes. Typically, most or all of the amount would be taxable. Be careful! There is almost always a time limit of 60 days to complete a conversion or rollover, with large penalties if the limit is not met.

Then again, taxpayers sometimes change their minds after making contributions to an IRA, or contributions or a conversion to a Roth IRA. Tax rules allow taxpayers to recharacterize their IRA contributions any time prior to the due date, including extensions, of their tax return. A recharacterization allows you to undo or reverse your rollover or contribution. With this in mind:

  • Think of IRA conversions as allowing you to transfer funds from a non-Roth IRA account into a Roth IRA account, often with a taxable impact.
  • Think of IRA recharacterizations as a set of special rules allowing you to change your mind about the type of your current year IRA contribution or Roth conversion.

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