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Learning, Sharing, and Teaching => Taxes => Topic started by: bortman on March 01, 2019, 08:03:59 AM

Title: recharacterize Roth to tIRA still possible in 2018? other ideas?
Post by: bortman on March 01, 2019, 08:03:59 AM
I'm looking for ways to reduce my tax bill after converting too much from tIRA to Roth IRA ...

In Dec 2018 I got to work on figuring out how much I would convert. I settled on $35,000 because (I thought) this number would leave me owing less than $100 after accounting for my wife's and my federal withholding, and keep us in the 12% tax bracket.

I hadn't yet received my W-2 so I added up the amount of federal tax withheld for 2018 from our last pay statements. Well, I screwed up .. either by making a typo, miscalculating, or misunderstanding.

Now I'm left with a tax bill of ~$3400.

I'm looking for ideas on how to mitigate my error.

Can I recharacterize from Roth IRA to tIRA? I've read that recharacterization has been eliminated for 2018, but threads  like this (https://forum.mrmoneymustache.com/taxes/recharacterization-reporting/) make me think that some form of recharacterization magic might still be possible (but probably not in a way that helps me).

I've considered contributing the max to both my wife's and my tIRAs .. this will reduce my tax bill by ~$1800.

Of course, I did my first ever conversion at exactly the wrong time for a rookie.

Otherwise, anyone have thoughts on other ways to reduce my tax bill?
Title: Re: recharacterize Roth to tIRA still possible in 2018? other ideas?
Post by: terran on March 01, 2019, 09:20:54 AM
You can't recharacterize your conversion. You may find information saying you can, but this is no longer true thanks to last years new tax law.

You can, however, recharacterize your 2018 IRA contribution, so if you and/or your wife made Roth contributions for 2018 you can recharacterize those any time until your tax filing deadline. Similarly, if you and/or your wife haven't yet made an IRA contribution for 2018 you can still make those contributions until your tax filing deadline. Whether or not those contributions are deductible depends on whether either of you (or your employer) contributed to a workplace retirement plan, and your Modified Adjusted Gross income. See the appropriate table at https://www.irs.gov/retirement-plans/ira-deduction-limits
Title: Re: recharacterize Roth to tIRA still possible in 2018? other ideas?
Post by: William Cannon on March 06, 2019, 10:16:00 AM
You can't recharacterize your conversion. You may find information saying you can, but this is no longer true thanks to last years new tax law.

You can, however, recharacterize your 2018 IRA contribution, so if you and/or your wife made Roth contributions for 2018 you can recharacterize those any time until your tax filing deadline. Similarly, if you and/or your wife haven't yet made an IRA contribution for 2018 you can still make those contributions until your tax filing deadline. Whether or not those contributions are deductible depends on whether either of you (or your employer) contributed to a workplace retirement plan, and your Modified Adjusted Gross income. See the appropriate table at https://www.irs.gov/retirement-plans/ira-deduction-limits

Can you elaborate on not being able to recharacterize on his conversion?
Title: Re: recharacterize Roth to tIRA still possible in 2018? other ideas?
Post by: dandarc on March 06, 2019, 10:24:48 AM
You can't recharacterize your conversion. You may find information saying you can, but this is no longer true thanks to last years new tax law.

You can, however, recharacterize your 2018 IRA contribution, so if you and/or your wife made Roth contributions for 2018 you can recharacterize those any time until your tax filing deadline. Similarly, if you and/or your wife haven't yet made an IRA contribution for 2018 you can still make those contributions until your tax filing deadline. Whether or not those contributions are deductible depends on whether either of you (or your employer) contributed to a workplace retirement plan, and your Modified Adjusted Gross income. See the appropriate table at https://www.irs.gov/retirement-plans/ira-deduction-limits

Can you elaborate on not being able to recharacterize on his conversion?
You used to be able to undo a Roth conversion up to your tax filing deadline (plus extension). The new law says you can't do that any more.
Title: Re: recharacterize Roth to tIRA still possible in 2018? other ideas?
Post by: terran on March 06, 2019, 08:34:41 PM
You can't recharacterize your conversion. You may find information saying you can, but this is no longer true thanks to last years new tax law.

You can, however, recharacterize your 2018 IRA contribution, so if you and/or your wife made Roth contributions for 2018 you can recharacterize those any time until your tax filing deadline. Similarly, if you and/or your wife haven't yet made an IRA contribution for 2018 you can still make those contributions until your tax filing deadline. Whether or not those contributions are deductible depends on whether either of you (or your employer) contributed to a workplace retirement plan, and your Modified Adjusted Gross income. See the appropriate table at https://www.irs.gov/retirement-plans/ira-deduction-limits

Can you elaborate on not being able to recharacterize on his conversion?
You used to be able to undo a Roth conversion up to your tax filing deadline (plus extension). The new law says you can't do that any more.

Right, conversions can no longer be recharacterized ("undone"), but contributions can.