Double Recharacterization Question

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zguy
Posts: 10
Joined: Wed May 16, 2018 4:03 pm

Double Recharacterization Question

Post by zguy » Wed Oct 10, 2018 12:14 pm

Hi All,

I believe I made an error with a re-characterization and not really sure how to fix. Here's the timeline.

-Made accidental 2017 rIRA contribution of $600 in March 2017 (was over income limit in 2017)
-Re-characterized contribution with earnings a week or so later to tIRA.
-Contributed the max for the rest of the year.

If i stopped here I think would have been OK. Here's where things get messy:

-Fast forward to January of 2018 when I went to start looking to file taxes and I realized I had an illegal Roth contribution and somehow totally forgot I already took care of it the previous March. :oops:

Re-characterized the same contribution from the Roth with earnings to the traditional IRA. (Looking back I would have thought Troweprice would have stopped me from doing this but apparently not).

Called Trowe price and we decided that we should just re-characterize the traditional IRA re-characterization back into the roth.

I do not believe what I did was right and I'm assuming I'll be getting some really strange 1099-R forms this year, looking for some guidance on how to account for this all. Trying to plan way in advance since I'm not a Trowe price customer any longer and that will probably make it even more complicated.

As a sidenote I will also be over the income limit for 2018 Roth contributions. I was also planning on doing a backdoor Roth this year.

Any and all help would be much appreciated.

kaneohe
Posts: 5148
Joined: Mon Sep 22, 2008 12:38 pm

Re: Double Recharacterization Question

Post by kaneohe » Wed Oct 10, 2018 6:39 pm

I believe you cannot recharacterize a recharacterization of a contribution . You also can't recharacterize the same contribution twice. Perhaps you should ask TRP what they intend to report next yr..........perhaps they will just report the first recharacterization and consider the second action to just be a correction of an error and not report it?

Consider asking your question at fairmark.com in the retirement forum........at the top click "Tax Help", then
"Fairmark Forum", then "Retirement Savings and Benefits". Look for a response by Alan S. He also posts here but
there are so many fish here, it's easy to be overlooked. Even tho I knew your post was here, I had a hard time finding it 5 minutes later.

Alan S.
Posts: 7862
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Double Recharacterization Question

Post by Alan S. » Wed Oct 10, 2018 7:18 pm

zguy wrote:
Wed Oct 10, 2018 12:14 pm
Hi All,

I believe I made an error with a re-characterization and not really sure how to fix. Here's the timeline.

-Made accidental 2017 rIRA contribution of $600 in March 2017 (was over income limit in 2017)
-Re-characterized contribution with earnings a week or so later to tIRA.
-Contributed the max for the rest of the year. Contributed the max to TIRA or Roth IRA?

If i stopped here I think would have been OK. Here's where things get messy:

-Fast forward to January of 2018 when I went to start looking to file taxes and I realized I had an illegal Roth contribution and somehow totally forgot I already took care of it the previous March. :oops:

Re-characterized the same contribution from the Roth with earnings to the traditional IRA. (Looking back I would have thought Troweprice would have stopped me from doing this but apparently not). You could not have recharacterized the same 600 from Roth to TIRA unless TRP made an accounting error on your Roth current year contribution balance. Are you sure the 600 contribution made in 3/17 was for 2017 and not 2016?

Called Trowe price and we decided that we should just re-characterize the traditional IRA re-characterization back into the roth.
Kaneohe is right, an already recharacterized contribution cannot be re recharacterized.

I do not believe what I did was right and I'm assuming I'll be getting some really strange 1099-R forms this year, looking for some guidance on how to account for this all. Trying to plan way in advance since I'm not a Trowe price customer any longer and that will probably make it even more complicated.

As a sidenote I will also be over the income limit for 2018 Roth contributions. I was also planning on doing a backdoor Roth this year.

Any and all help would be much appreciated.

Please clarify these questions.

zguy
Posts: 10
Joined: Wed May 16, 2018 4:03 pm

Re: Double Recharacterization Question

Post by zguy » Thu Oct 11, 2018 6:48 am

Thank you for the responses.

Alan S,

-I contributed the max to tIRA in 2017.
-The 3/17 was transaction was definitely a 2017 contribution.

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