Client did two transactions in 2015. One was a conversion of a traditional IRA to a Roth. The second transaction was a direct rollover of traditional IRA funds from one firm to another. It was supposed to remain a traditional IRA but instead the 1099R is showing it as taxable income and the 5498 is showing that same dollar amount as a Roth conversion. Is there any hope of undoing this mistake? The rollover took place last October. The client is adamant that the investment firm made the error.
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Is there time to re-characterize the mistake? Might need an extension!
Hope this helps!What is a recharacterization of a rollover or a conversion?
A recharacterization allows you to “undo” or “reverse” a rollover or conversion to a Roth IRA. You generally tell the trustee of the financial institution holding your Roth IRA to transfer the amount to a traditional IRA (in a trustee-to-trustee or within the same trustee). If you do this by the due date for your tax return (including extensions), you can treat the contribution as made to the traditional IRA for that year (effectively ignoring the Roth IRA contribution).
For details, see “Recharacterizations” in Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs).
Sandy
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Thank you!
Yes, it does indeed help and an extension is on it's way. Thank you again.Comment
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