Recharacterizing TRAD Ira

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Godot
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Recharacterizing TRAD Ira

Post by Godot » Mon Apr 15, 2019 4:34 pm

Last year I put 6,500 in a Trad-Ira, but discovered this year that only 790 of that was eligible, because of income limits. I'm assuming that today is the last day that I can recharacterize the 5,710, yes? I've also seen Oct 15th as the last day of the year it was contributed. Am on hold now with Fidelity. Is recharacterizing the 5,710 into a Roth for 2017 the best way to go here? I realize I would have to file an amended return. TIA.
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mhalley
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Re: Recharacterizing TRAD Ira

Post by mhalley » Mon Apr 15, 2019 6:13 pm

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Duckie
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Re: Recharacterizing TRAD Ira

Post by Duckie » Mon Apr 15, 2019 6:20 pm

Godot wrote:Last year I put 6,500 in a Trad-Ira, but discovered this year that only 790 of that was eligible, because of income limits.
Have you confirmed you're under the Roth IRA income limits?
I'm assuming that today is the last day that I can recharacterize the 5,710, yes?
According to this post you have until October 15th to recharacterize a contribution for 2018.
Is recharacterizing the 5,710 into a Roth for 2017 the best way to go here?
Do you mean 2018?

If you're over the 2018 Roth IRA income limits which prevents recharacterization, you could convert the non-deductible portion to a Roth IRA. You would need to file Form 8606 for 2018 to document the non-deductible basis. That form can be filed on its own. But the conversion would need to be pro-rated with all your non-Roth IRAs and that could mean paying taxes on most of the converted amount. This is probably not a good idea, but it's possible.
I realize I would have to file an amended return.
Have you already filed your taxes? Did you deduct the entire $6500 or just the $790? If you deducted just the $790 I don't think you have to amend your return.

Alan S.
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Re: Recharacterizing TRAD Ira

Post by Alan S. » Mon Apr 15, 2019 7:48 pm

To be able to utilize the 10/15 (extended due date) deadline for recharacterization or return of contributions with earnings, you must either have:

1) Filed an extension for 2018 by midnight tonight or
2) Filed your actual return (even if it is later amended) by midnight tonight.

Otherwise, your deadline is midnight tonight.

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