Roth conversion

Mar 01, 2010 1 Replies
B

I moved mutual funds from my regular IRA to a Roth IRA in early 2009. In November, I realized my income was too high to make the conversion so I moved the same mutual funds back to the regular IRA. I have received two 1099Rs - one for the withdrawal from the regular IRA and one for the Roth IRA when I moved it back to the regular IRA. There was also a gain of $2,000 while the mutual fund was in the Roth IRA.



These mutual funds originally were "after tax" contributions. The IRA that I moved them to originally is a pre-tax IRA. How do I handle this on my tax return?


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This is a recharacterization. Whether you do it in the same year or in the following year, you report both 1099s, with zero taxable income. Effectively, the gain while in the Roth IRA goes back to the traditional IRA, so you will have that much more for the next conversion you do. Of course this year, you don't have the income limit to worry about. The after-tax amount (for Form 8606) would be the same as before.

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