Re-characerization questions

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Re-characerization questions

Post by SpartanBull » Wed Jan 11, 2017 2:54 am

I have a couple of questions about re-characterization. Last year (2016) I contributed to a personal roth IRA. Additionally, in my I401k I also contributed 18k to the Employee portion, in Roth form (this was an option in the Roth Ira).
This year, I contributed the max to a Roth Ira (personal), and haven't done the I401k stuff yet.
1) Is last years personal Roth IRA still allowed to be re-characterized to traditional? My thought is that I'm allowed to do this before tac time rolls around...let me know if thats correct?
2) Is my I401k employer portion from last year, where I went the Roth Route on it....still able to be re-characterized to the traditional, income deduction style of doing it?
3) Is my Personal IRA contribution made in 2017, as a Roth IRA contribution, still recharactierizable to a traditional IRA instead?
Any input is appreciated. Thanks!

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House Blend
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Re: Re-characerization questions

Post by House Blend » Wed Jan 11, 2017 11:37 am

Regarding #2: I don't think any flavor of 401(k) can do recharacterizations.

Regarding #1 and #3, you need to be careful about tax years and contribution dates, because you could have made a "2015" IRA contribution anytime from 1/1/2015 to 4/15/2016.

So if you made a Roth IRA contribution for the 2015 tax year in 2016, it is too late to recharacterize it. However, if it was for the tax year 2016, it is not too late. You have until October of this year, although the reporting involved is simpler if you recharacterize before you file your 2016 taxes.

Likewise, if you've made a Roth IRA contribution for the 2017 tax year, you have plenty of time to recharacterize it.

Alan S.
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Re: Re-characerization questions

Post by Alan S. » Wed Jan 11, 2017 12:16 pm

Actually, a 2015 IRA contribution MADE between 1/1/2016 and 4/15/2016 can still be recharacterized. The deadline is the extended due date for the tax year IN WHICH (not FOR WHICH) the contribution being recharacterized was made. The IRS has different Box 7 codes to flag WHICH year the recharacterization is for (Code N or R).

To summarize:
1) Q 1 - if you MADE the contribution in 2016 no matter which year it was for, you can still recharacterize it up to the extended due date (10/16/2017) if you either file or extend your return by 4/18/2017. Otherwise the deadline is 4/18/2017. Note that you may or may not be able to deduct the TIRA contribution.

2) No, you cannot recharacterize i401k deferrals. However, if you had made the deferrals to the traditional 401k and the plan allowed in plan Roth rollovers (conversions), you could roll the pre tax amounts to the designated Roth portion, but could not recharacterize that action either once done.

3) Yes, if made in 2017 you have until 10/15/2018 to recharacterize it.

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