Roth Recharacterization Problems?!

I converted my $200,000 IRA to a Roth last year. I had an accountant do my tax return and was shocked by how much tax I had to pay on it. He tested a few numbers and we determined I should recharacterize $170,000. He said it had to be done before I filed, so I did it promptly. But I have some real problems now.

1) He made several serious mistakes in my return that I didn't know about until he got it to me for my signature. My taxes are much lower than he said. Accordingly, I could have kept another $25,000 of the Roth for trivial taxes. I asked the investment company to redo it, but they say they can't because of liability issues; but won't explain that. Can they redo it, or not? (I still haven't filed my return)

2) I got a check in the mail today for $30,000; the part of the Roth that wasn't recharacterized. I read over the recharacterization form and it doesn't mention what becomes of the unrecharactized portion. I assumed it remained in the Roth. Obviously that is not how they understood it. What do I do now? A related issue is that the $30,000 went up 15% since I converted, but the $4,500 seems to have just vanished.

Reply to
Tobey
Loading thread data ...

You had until Oct 15, even if you filed earlier. The custodian was right: you can't undo a recharacterization. But the custodian was wrong to send you the remaining balance in the Roth IRA. But that one you can fix as long as you put it into another Roth within 60 days. It wouldn't surprise me if you decided you needed both a new tax preparer and a new IRA custodian.

Reply to
Tom Healy CPA

You can reconvert 31 days after the recharacterization. This will be a 2011 conversion, though, so consider the effect on your 2011 taxes. It's too late to do any kind of 2010 conversion.

You need to raise a ruckus at your custodian. I suspect that they sent all the earnings back to your traditional IRA, which is wrong. They also shouldn't have closed your Roth and distributed it without your instruction to do so. Do take heed of the previous advice about rolling the $30,000 into a Roth IRA. That must be done within 60 days of the date of the check. I'd do it at a new custodian.

Phil Marti VITA/TCE Volunteer

Reply to
Phil Marti

BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.