Roth Recharacterization deadlines

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LeeMKE
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Roth Recharacterization deadlines

Post by LeeMKE » Sat Dec 23, 2017 3:31 pm

Fidelity told me last week that recharacterizations need to be in to them by December 22 to be certain of processing by year end. I'm sure other brokerage firms will be under the same deadlines.

If you, like me, have converted funds to Roth, expecting to true up in 2018 when doing your taxes, it is uncertain you will be able to do this. CPAs online are split in their thinking right now. So, to be safe, you need to recharacterize immediately if you can't afford to go over a certain amount.

Sorry for the late post, but the moderators deleted my post on this issue, saying I had to come back once the bill was signed into law.
The mightiest Oak is just a nut who stayed the course.

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FIREchief
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Re: Roth Recharacterization deadlines

Post by FIREchief » Sat Dec 23, 2017 4:52 pm

LeeMKE wrote:
Sat Dec 23, 2017 3:31 pm
Fidelity told me last week that recharacterizations need to be in to them by December 22 to be certain of processing by year end. I'm sure other brokerage firms will be under the same deadlines.

If you, like me, have converted funds to Roth, expecting to true up in 2018 when doing your taxes, it is uncertain you will be able to do this. CPAs online are split in their thinking right now. So, to be safe, you need to recharacterize immediately if you can't afford to go over a certain amount.

Sorry for the late post, but the moderators deleted my post on this issue, saying I had to come back once the bill was signed into law.
It is highly unlikely that this has anything to do with the recently passed legislation. If we assume previous rules continue to apply for the 2017 tax year (which some of us think is clearly stated in the committee report), then it is just a reporting issue on your 1040 regarding whether or not a 2017 conversion was recharacterized by ye 2017 or by next Oct 15.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

LeeMKE
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Re: Roth Recharacterization deadlines

Post by LeeMKE » Sat Dec 23, 2017 5:02 pm

It is highly unlikely that this has anything to do with the recently passed legislation. If we assume previous rules continue to apply for the 2017 tax year (which some of us think is clearly stated in the committee report), then it is just a reporting issue on your 1040 regarding whether or not a 2017 conversion was recharacterized by ye 2017 or by next Oct 15.
The recently passed legislation is clear that recharacterization is no longer allowed. So, in 2018, we cannot convert and then recharacterize later, ever again.

However, there is disagreement among well qualified authorities, as to whether 2017 conversions can be recharacterized in 2018. Ergo, you can wait until 2018 and take your chances, maybe you win, maybe you don't. But in my case (and many others) we can't afford to convert too much and fall over a cliff on other tax considerations.

So I rushed to do a dummy tax return and then recharacterized late Thursday evening, 12/21. As of now, 4 PM Saturday 12/23, no order is showing up on the Fidelity website. Maybe it will appear on Monday or Tuesday.
The mightiest Oak is just a nut who stayed the course.

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FIREchief
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Re: Roth Recharacterization deadlines

Post by FIREchief » Sat Dec 23, 2017 6:46 pm

LeeMKE wrote:
Sat Dec 23, 2017 5:02 pm
It is highly unlikely that this has anything to do with the recently passed legislation. If we assume previous rules continue to apply for the 2017 tax year (which some of us think is clearly stated in the committee report), then it is just a reporting issue on your 1040 regarding whether or not a 2017 conversion was recharacterized by ye 2017 or by next Oct 15.
However, there is disagreement among well qualified authorities, as to whether 2017 conversions can be recharacterized in 2018.
Yeah, I was aware of the conflicting reports. Not so sure who these "well qualified authorities" are. I've read the conference committee report, and unless they are using some alternate definitions for common english words, it's pretty clear that the recharacterization changes apply only to tax years 2018 and beyond. 8-)
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

LeeMKE
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Re: Roth Recharacterization deadlines

Post by LeeMKE » Sat Dec 23, 2017 10:31 pm

Yeah, I was aware of the conflicting reports. Not so sure who these "well qualified authorities" are. I've read the conference committee report, and unless they are using some alternate definitions for common english words, it's pretty clear that the recharacterization changes apply only to tax years 2018 and beyond. 8-)
I'm taking the word of licensed CPAs and Tax Attorneys. I've been to law school and know that plain english changes meaning when being interpreted as legal language, and then translated by a bureaucracy for enforcement. I'd rather be safe than sorry.
The mightiest Oak is just a nut who stayed the course.

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FIREchief
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Re: Roth Recharacterization deadlines

Post by FIREchief » Sun Dec 24, 2017 1:40 am

LeeMKE wrote:
Sat Dec 23, 2017 10:31 pm
Yeah, I was aware of the conflicting reports. Not so sure who these "well qualified authorities" are. I've read the conference committee report, and unless they are using some alternate definitions for common english words, it's pretty clear that the recharacterization changes apply only to tax years 2018 and beyond. 8-)
I'm taking the word of licensed CPAs and Tax Attorneys. I've been to law school and know that plain english changes meaning when being interpreted as legal language, and then translated by a bureaucracy for enforcement. I'd rather be safe than sorry.
This may all be true. Do what you think is best (also, please see my signature). 8-)
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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HueyLD
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Re: Roth Recharacterization deadlines

Post by HueyLD » Sun Dec 24, 2017 9:38 am

LeeMKE wrote:
Sat Dec 23, 2017 10:31 pm
Yeah, I was aware of the conflicting reports. Not so sure who these "well qualified authorities" are. I've read the conference committee report, and unless they are using some alternate definitions for common english words, it's pretty clear that the recharacterization changes apply only to tax years 2018 and beyond. 8-)
I'm taking the word of licensed CPAs and Tax Attorneys. I've been to law school and know that plain english changes meaning when being interpreted as legal language, and then translated by a bureaucracy for enforcement. I'd rather be safe than sorry.
+1.

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privatefarmer
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Re: Roth Recharacterization deadlines

Post by privatefarmer » Sun Dec 24, 2017 11:08 am

So does anyone know definitively if I were to convert a traditional IRA --> roth before end of year, can I still recharacterize it back to a Roth next October should the market fall? Thanks!

Small Law Survivor
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Re: Roth Recharacterization deadlines

Post by Small Law Survivor » Sun Dec 24, 2017 12:27 pm

privatefarmer wrote:
Sun Dec 24, 2017 11:08 am
So does anyone know definitively if I were to convert a traditional IRA --> roth before end of year, can I still recharacterize it back to a Roth next October should the market fall? Thanks!
This is being debated quite extensively, here and elsewhere - bottom line seems to be that no one knows for certain, but the majority opinion is that you will be able to recharacterize next year. The conservative approach is to assume you won't be able to. Tough call ...

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privatefarmer
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Re: Roth Recharacterization deadlines

Post by privatefarmer » Sun Dec 24, 2017 12:52 pm

Small Law Survivor wrote:
Sun Dec 24, 2017 12:27 pm
privatefarmer wrote:
Sun Dec 24, 2017 11:08 am
So does anyone know definitively if I were to convert a traditional IRA --> roth before end of year, can I still recharacterize it back to a Roth next October should the market fall? Thanks!
This is being debated quite extensively, here and elsewhere - bottom line seems to be that no one knows for certain, but the majority opinion is that you will be able to recharacterize next year. The conservative approach is to assume you won't be able to. Tough call ...
Thanks. Yeah even if it's legal we may not be able to find a brokerage who will be willing to recharacterize after start of new year... and I'll be in a lower bracket next year bc of tax law so maybe better to just not risk converting.

pshonore
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Re: Roth Recharacterization deadlines

Post by pshonore » Sun Dec 24, 2017 2:57 pm

LeeMKE wrote:
Sat Dec 23, 2017 5:02 pm
It is highly unlikely that this has anything to do with the recently passed legislation. If we assume previous rules continue to apply for the 2017 tax year (which some of us think is clearly stated in the committee report), then it is just a reporting issue on your 1040 regarding whether or not a 2017 conversion was recharacterized by ye 2017 or by next Oct 15.
The recently passed legislation is clear that recharacterization is no longer allowed. So, in 2018, we cannot convert and then recharacterize later, ever again.

However, there is disagreement among well qualified authorities, as to whether 2017 conversions can be recharacterized in 2018. Ergo, you can wait until 2018 and take your chances, maybe you win, maybe you don't. But in my case (and many others) we can't afford to convert too much and fall over a cliff on other tax considerations.

So I rushed to do a dummy tax return and then recharacterized late Thursday evening, 12/21. As of now, 4 PM Saturday 12/23, no order is showing up on the Fidelity website. Maybe it will appear on Monday or Tuesday.
I requested one via the online form on Tuesday 12/19 about 6pm. No official notification but the shares are back in my TIRA on Saturday am.
Pending transfer section show it will be completed by 12/26 (probably would be done by tomorrow if not a holiday). Also an entry in Acct History dated 12/26. (Fido also shows all my iSharee ETF as paid and reinvested on 12/26 that was there yesterday as well)

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