Recharacterization

Recharacterization

The reversal of a traditional IRA contribution or conversion into a Roth IRA, or vice versa.

Recharacterization

In IRAs, the act of making a contribution to a certain account, then deciding to apply the contribution to a different type of IRA. For example, if one has both a traditional IRA and a Roth IRA, one may make a contribution to the traditional account, then decide that it would be more beneficial to apply the contribution to the Roth account. Recharacterization is subject to certain rules. Primarily, one may not recharacterize tax-free rollovers or employer contributions.

Recharacterization.

When you have converted one type of individual retirement account (IRA) to another type -- such as a traditional IRA to a Roth IRA -- and then convert it back to the original type, you are recharacterizing the IRA.

Similarly, you can recharacterize a contribution you've made to one type of IRA as a contribution to another type of IRA. In either case, when the recharacterization is handled correctly, the original conversion or contribution is erased, as if it never happened. To be valid, a recharacterization must be handled as a transfer between IRA providers or internally by a single provider.

Further, it must be completed before the date your tax return is due, including extensions. You must also report the action to the IRS, and in some cases, you must file an additional form.

Recharacterization

Recharacterization is the process of changing the character of a traditional IRA contribution to a Roth IRA contribution or vice versa.
References in periodicals archive ?
Because of these significant changes, it is crucial for taxpayers and their advisors to be familiar with the regulations, which apply to taxable years ending on or after January 19, 2017, and to any debt instruments subject to recharacterization issued immediately after January 19, 2017.
Thus, it upheld the IRS's recharacterization of the transactions and the tax assessment against Summa Holdings.
Recent statistics from the CRA's Transfer Pricing Review Committee (TPRC) with respect to penalty and recharacterization provide some insights into the CRA's approach to the assessment of transfer pricing penalties and the issuance of recharacterization reassessments.
Recharacterization rules allow the complete reversal of a Roth conversion if it is completed by the timely filing of the client's tax return for the year of the conversion.
The later date is the deadline for a full or partial recharacterization back to a traditional IRA.
First, C corporations should be explicitly exempted from recharacterization of income under carried interest tax provisions.
First, recharacterization from a Roth to a traditional IRA must be completed by October 15 of the calendar year after the conversion.
A cluster of cases in Michigan has resulted in the recharacterization of bath salts as a recreational drug.
Of these, about 56% have been recommended for recharacterization as permanent disability retirement.
13) Whether reported on the initial or amended return, a separate statement explaining the facts surrounding the original conversion and recharacterization should be attached to the return.
1, 2000, there is a waiting period between a recharacterization and a conversion.
Note also that a recharacterization must generally occur within the time for filing an income tax return (including extensions) for the year of the original conversion to a Roth IRA.