Recharacterization


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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 ?
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.
A cluster of cases in Michigan has resulted in the recharacterization of bath salts as a recreational drug.
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.
Assets recharacterized can be reconverted at the later of (1) the beginning of the year after the year of recharacterization, or (2) the end of the 30-day period beginning on the day of the recharacterization.
1, 2000, there is a waiting period between a recharacterization and a conversion.
Announces Recharacterization of Certain On-Balance Sheet Securitizations as Sales under FASB Statement No.
permit the recapture of overall domestic losses (similar to section 904(f)'s recharacterization of overall foreign losses);
408A-5, this recharacterization election must occur on or before the date prescribed by law, including extensions, for filing the taxpayer's federal income tax return for the year of the contribution.
The latest effort, sent in by alert accountant Craig Podosek, is Schedule J, Form 1118, which is titled - I am not making this up - "Separate Limitation Loss Allocations and Other Adjustments Necessary to Determine Numerators of Limitation Fractions, Year-End Recharacterization Balances, and Overall Foreign Loss Account Balances.
The "employer" should take as many steps as possible to avoid the recharacterization of an independent contractor as an "employee.
The new tax on net investment income has crowned a new rule: A once-obscure recharacterization provision is threatening to swallow the broader material participation tests under Sec.