Very confused about reporting IRA->Roth transactions on Income Tax

Feb 04, 2009 3 Replies
G

In 2008, I had the following transactions (all with Fidelity):



Convert IRA to Roth...........................100,000 Return of excess contributions...............5,000 Recharacterized Roth back to IRA.......50,000



I did the return of excess because I realized that I had forgotten to take my minimum required distribution before converting. I did the partial recharacterization because I realized I wouldn't have enough cash to pay the resulting income taxes. Because of losses, the amount Fidelity actually withdrew and returned to me was $4,500. Because of losses, the amount they actually transferred back into my IRA for the recharacterization was $45,000.



I usually do my own income taxes, but I'm very confused about what to report how and where in filling out my income tax. Can someone out there give me a clue? Are there any tax consequences to the losses?



Thanks in advance.


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R

Use form 8606 to report conversions, recharacterizations, and non- deductible contributions. Do you do it yourself using a computer program or write into the forms directly? The loss is deductible only if close out all of your traditional IRAs, and the loss is only allowed on your non-deductible contributions, and the loss is subject to the 2% of AGI rule (only the loss over 2% of your AGI is deductible), and the loss is not allowed under AMT (ie. so it may increase your AMT tax). See

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an explanation.

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M

But the conversion amount recharacterized should still be $100K under most circumstances (did you have other contributions or distributions during the calculation period from conversion date to recharacterization date?)

You could do more research, or hire a professional. It's not likely that your 1099-R forms alone will resolve everything, a statement to the IRS with your return will most likely be required.

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for an explanation.>

You should re-read the article you posted. It's not common to have a basis in a Trad. IRA, so what loss are you talking about?

-Mark Bole

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M

Sorry, upon re-reading I see your statement above is accurate, but I don't think it applies at all to the OP's situation. He apparently doesn't have, and isn't concerned about, a deductible loss. What he is trying to accomplish with the recharacterization, is to not pay tax in the first place on conversion income that has since evaporated.

-Mark Bole

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