Hi guys, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com
Did you convert all or part of a retirement account to a Roth IRA during 2014?
And do you now wish you hadn’t?
Here’s some good news: You have until October 15, 2015, to change your mind,
even if you already filed your federal income tax return.
The tax term that we use for undoing the conversion and switching your funds back to a traditional IRA from a Roth is “recharacterization.”
You can recharacterize any amount of your original conversion, no matter your income, and for any reason. When you recharacterize the entire conversion amount, you put yourself back in the position you were in originally.
Why would you want to do that? Here are some tax situations that might warrant the “redo”
1. You might be in higher tax bracket than what you anticipated and reconverting will reduce your income.
2. Your investments didn’t do as well as you anticipated and the value in your account has declined.
Leaving the money in the new Roth means you pay tax on the original amount you converted. If you do a “redo” you will save tax dollars.
If you like to learn more, click the link lowermytaxnow.com and subscribe to my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com