Not sure if I'm on the right track here. Client has a Roth IRA that she contributed about $1600 to in 2007. Client got married in 2007 and now AGI is well over the phase out amount, about $180K. I know that she can withdraw the $1600 without paying tax on it or penalty if done prior to filing date, although she would have to pay tax on any earnings as well as the 10% penalty for early withdrawl. My question is, can she avoid paying any tax if she recharacterizes the $1600 she contributed in 2007 to a traditional IRA in a trustee to trustee transfer. It would still be a non-deductible contribution, but wouldn't she avoid any taxes or penalties?
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Surely there can not be much earnings on the 1600 yet and at that income level that should not hurt. However, the trustee can simply redesignate the first one as the second. -
You are correct of course. I guess I'm asking more to make sure that I could do that for the client as an option. Never run across one like this before.Comment
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