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andrew1 writes:
I called Vanguard to undo a Roth conversion and they said I have to request it in writing and warned me that they do not have a clarification from the IRS yet on any tax consequences yet. Is it really as easy to do or is the IRS getting ready to make trouble for all us reconverters?

The proposed Roth IRA regulations the IRS released a couple of weeks ago seem pretty clear in stating that "recharacterizing" conversions is allowed for any reason. You can check them out, along with questions and answers, here:

Furthermore, as someone noted earlier, even though these regulations are merely "proposed", they say the following:

Taxpayers may rely on these proposed regulations for guidance pending the issuance of final regulations. If, and to the extent, future guidance is more restrictive than the guidance in these proposed regulations, the future guidance will be applied without retroactive effect.

So it doesn't sound too likely to me that there will be big trouble for reconverters. Nevertheless, I wouldn't bother with it unless I stood to benefit substantially.

You can read more at Kaye Thomas's site:

TMFTaxes has noted that reconversion merely for tax benefit doesn't seem to obey the spirit of the law. I agree with him, although there are certainly plenty of other popular tax maneuvers that fit in that category. I'm not reconverting myself, but it would only save me about $50, so I can't really claim moral high ground here. :)

In general, the more people do reconversions, the more Congress may come to see this whole Roth thing as serving lots of purposes it wasn't intended for. Personally, I hope they do, but that's a rant for another day.

- Darrell
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