Moving money from Roth IRA to Traditional IRA

[Eilts88]

Hey Everyone. I have kind of a weird questions I cant seem find the answer to. I maxed out mine and my wife's Roth IRA's earlier this year. I later learned that it would probably be better for me to put those contributions in a Traditional Roth and get the tax wright off. My question is this, can I remove my 2018 contribution from the Roth IRA and move it to a traditional IRA so I can wright of that amount during tax time. Any insight on this would be greatly appreciated. Thank you. 

[dandarc]

Call your broker and tell them you want to recharacterize your 2018 IRA contribution from Roth to Traditional.

You have until your tax-filing deadline (4/15/19) with extension if you file an extension (10/15/19) to do this.

Be sure to be very clear when you are speaking with them "recharacterize the contribution" is what you want. It will make it as if you made a traditional contribution all along.

Also - "Traditional Roth" is not a thing, and using that term would confuse your conversation. Hopefully that is a typo.

[dandarc]

You could also do a partial recharacterization, if you find yourself in the position that you can deduct some of a traditional IRA contribution but not all of it.

[dandarc]

Links:

https://www.irs.gov/retirement-plans/ira-faqs-recharacterization-of-ira-contributions

https://www.irs.gov/pub/irs-pdf/p590a.pdf

[Eilts88]

Thank you all for the information. This is exactly the information I needed. And yes that was a typo/bad habit of mine. Sometimes I call a traditional Roth IRA even though I know better. Thanks again everyone.

[MustacheAndaHalf]

I think this is no longer allowed, per changes in the tax reform act.  To quote the irs.gov website:

"A Roth IRA conversion made on or after January 1, 2018, cannot be recharacterized. For details, see “Recharacterizations” in Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs)."
https://www.irs.gov/retirement-plans/ira-faqs-recharacterization-of-ira-contributions

[walkwalkwalk]

I think this is no longer allowed, per changes in the tax reform act.  To quote the irs.gov website:

"A Roth IRA conversion made on or after January 1, 2018, cannot be recharacterized. For details, see “Recharacterizations” in Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs)."
https://www.irs.gov/retirement-plans/ira-faqs-recharacterization-of-ira-contributions

He didn't convert from traditional to Roth first. (that part is the conversion part). He just wants to recharacterize the roth back to traditional.

[terran]

I think this is no longer allowed, per changes in the tax reform act.  To quote the irs.gov website:

"A Roth IRA conversion made on or after January 1, 2018, cannot be recharacterized. For details, see “Recharacterizations” in Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs)."
https://www.irs.gov/retirement-plans/ira-faqs-recharacterization-of-ira-contributions

He didn't convert from traditional to Roth first. (that part is the conversion part). He just wants to recharacterize the roth back to traditional.

Agreed. Recharacterizations are no longer allowed on conversions, but they are allowed on contributions.

[boulder3381]

I have a question that continues from the vein of this thread.

What are my options if:

2019-01-15 Wife and I maxed out my Roth IRA
2019-03-01 Our combined pay increases this year / at end of last year will make us ineligible for Roth Contributions ( this where I screwed up )

Possible solution:
  We recharacterize our contributions as 2019- Traditional IRA contributions


Then in 2019 Tax filing (2020/04/15) we convert them to Roth?


In other words, do I have an option to re-characterize the 2019 and then convert it as a personal backdoor.  Or am I to understand that conversations of traditional to roth are not an option any more?

[MustacheAndaHalf]

@walkwalkwalk - Okay, thanks for the clarification.
@terran - Got it, only on contributions.

[terran]

In other words, do I have an option to re-characterize the 2019 and then convert it as a personal backdoor.  Or am I to understand that conversations of traditional to roth are not an option any more?

Yes, that should work. If you have any previously deducted traditional IRA balances that could become problematic just as it would with a backdoor Roth without the recharacterization.

[MDM]

  We recharacterize our contributions as 2019- Traditional IRA contributions

You need to call your brokerage and have it do the IRA recharacterization.

Then in 2019 Tax filing (2020/04/15) we convert them to Roth?

No.  You do the conversion through the brokerage.  You report the non-deductible tIRA contribution and the subsequent conversion to Roth using Form 8606.  Do make sure you understand the details of the Backdoor Roth process before starting it.

[boulder3381]

@MDM @terran thanks.

to summarize:

1) Contact our respective brokerages have them recharacterize any 2019 Roth IRA Contributions as Traditional Contributions.
2) through brokerage convert tIRA to rIRA  (question below when)
3) Report the non-deductible tIRA contribution and conversion (executed by brokerage) on Form 8606.

Great.  One detail, does step 2) need to take place after 2019 tax filings or before? after or before end of fiscal year 2019?   In other words can I execute #1 and #2 in next 30 days, or do I need to wait?

[MDM]

@MDM @terran thanks.

to summarize:

1) Contact our respective brokerages have them recharacterize any 2019 Roth IRA Contributions as Traditional Contributions.
2) through brokerage convert tIRA to rIRA  (question below when)
3) Report the non-deductible tIRA contribution and conversion (executed by brokerage) on Form 8606.

Great.  One detail, does step 2) need to take place after 2019 tax filings or before? after or before end of fiscal year 2019?   In other words can I execute #1 and #2 in next 30 days, or do I need to wait?

You can do a recharacterization at any time through October 15 of the year after you made the original contribution.  In your situation there is no need to wait.

You can do a conversion at any time.  Any taxable amount of the conversion will be taxable for the calendar year in which the conversion occurs.  Doing a conversion ASAP is the best way to minimize taxable growth within the tIRA.