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What forms do I fill out for my broker to recharacterize my 2010 Traditional IRA contribution that was in my traditional IRA that I completely converted to a Roth IRA in 2010 right after the above contribution so that instead the 2010 contribution is directly to the Roth IRA but leaving the balance of funds in the traditional IRA still converted to Roth?

This is needed because the Roth conversion will be taken as income in 2011 and 2012 under election of special rules for 2010 conversions, but I want to take the 2010 contribution portion and not get deductible IRA benefit in 2010 and instead have that portion go straight to Roth as a 2010 Roth contribution, to put some of the tax burden in 2010.

Do I need to only recharacterize the contribution or do I also need to recharacterize back the portion of the converted Roth that is allocatable to the contribution that I am recharacterizing?

I understand that this is a very technical and difficult question, but I am hoping there is an expert on here that knows the answer.

  • Trivia: Why do so many folks capitalize "ROTH"? (i.e. you're not alone!) It's not an acronym, it's simply a name. Roth IRAs are so-named because the guy who sponsored their creation was Senator William Roth of Delaware. See en.wikipedia.org/wiki/Roth_IRA – Chris W. Rea Oct 17 '11 at 15:20
  • I'd bet it's a remnant of the fact that it's an IRA, not Ira. The caps just follow. I agree, though, Roth is correct. – JoeTaxpayer Oct 17 '11 at 19:00
  • @ChrisW.Rea I was thinking that as I was typing it and not sure which was correct, but recalling seeing it all upper, I went with that. Thanks for the correction. – WilliamKF Oct 17 '11 at 20:03
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William - You need to go to a local branch right now. I know few brokers that will guarantee a same day transaction of this type.

I tried to read your question a few times, and am stuck. I believe I understand Traditional IRAs, Roth IRAs, and the rules of conversion pretty well. It sounds to me like you want to have income in 2010 for one transaction, and over the 11-12 tax years for another. A recharacterization shouldn't be part of this. Recharacterizing takes you back to a traditional IRA from a Roth conversion.

But if there's something you actually need done, today is the last day, and direct dialog with the broker is probably best.

If you edit your question for clarity, I'll edit my response.

Edit - Taking the income in 2010 was a choice, take in 10 or split over 11 and 12. The only way to take over all three years would have been to convert or deposit in different accounts. Recharacterizing doesn't apply in this scenario.

For future readers - part of this discussion surrounds a one-time chance to convert from one IRA type to another and defer that income over the next two tax years. It's an important issue, but one that will not apply after this evening. Today is the final day for 2010 returns even with extension of 6 months.

  • You can recharacterize two different kinds of things: a ROTH conversion and an IRA contribution (from ROTH to Traditional or vice-verse). – WilliamKF Oct 17 '11 at 19:52
  • Some folks have until October 31 due to extension due to hurricane Irene. – WilliamKF Oct 17 '11 at 19:53
  • William - yes, right on both counts. I forgot about Irene, excellent point. – JoeTaxpayer Oct 17 '11 at 20:02
  • Wells Fargo is effecting the recharacterization for me today, by moving the contribution back as a pro-rated portion of the Roth conversion back into the traditional (along with its gain/loss) and then converting the 2010 traditional contribution to a Roth contribution through recharacterization. – WilliamKF Oct 17 '11 at 20:07
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Only one form is needed (according to Wells Fargo). It is the WellsTrade IRA Recharacterization Form. Item B is filled out for a partial recharacterization with the from account being the Traditional IRA and the to account being the Roth IRA. Under description of contribution to be recharacterized, the check box for "Annual IRA Contribution (Traditional or Roth)" is checked off and the amount of the 2010 contribution to the traditional IRA is listed along with the date of that contribution and that it was made for 2010 tax year.

Wells Fargo then transferred back from the Roth to the Traditional IRA the amount of the 2010 contribution, accounting for any gain or loss, and then recharacterized this amount as a Roth contribution, and put it back in the Roth IRA again.

Net effect is the money is all still in the Roth IRA, but, the 2010 contribution is as if it was made directly to the Roth IRA, and this is not considered to have been part of the conversion amount that will be taxed in 2011 and 2012 per the election.

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