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Author: twputnam One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 120826  
Subject: Roth IRA recharacterization Date: 2/6/2003 7:34 PM
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Can anyone help me with the mechanics of a traditional IRA conversion to a ROTH IRA and the subsequent recharacterization - both in year 2002? Where do I report the conversion and where and how do I report the recharacterization so that the two distributions "wash" each other out so that there are no tax consequences? I received two 1099R's, one with a "7" in box 7 and the other with "N" in box 7.

I am using a program called "TAXWISE" and it is no help at all. This is the program that the AARP volunteers use.

Thanks

Terry
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Author: pmarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 63967 of 120826
Subject: Re: Roth IRA recharacterization Date: 2/19/2003 8:18 PM
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Can anyone help me with the mechanics of a traditional IRA conversion to a ROTH IRA and the subsequent recharacterization - both in year 2002? Where do I report the conversion and where and how do I report the recharacterization so that the two distributions "wash" each other out so that there are no tax consequences? I received two 1099R's, one with a "7" in box 7 and the other with "N" in box 7.

Download the instructions for Form 8606 from the IRS site. The key here is your explanation of what happened, which you attach to your return. You prepare the 8606 as if the recharacterized transactions never happened. TaxWise should take care of the 1040 entries if you just enter the 1099-R information into the 1099-R forms portion of the program.

Phil Marti
VITA Volunteer

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Author: twputnam One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 63977 of 120826
Subject: Re: Roth IRA recharacterization Date: 2/19/2003 11:52 PM
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Phil,

Thanks for your reply, but, I still have questions. I downloaded the instructions for Form 8686 as you suggested. The first bullet under Who Must File on page 1 does not apply to me since I did not contribute to an IRA in 2002. The second bullet under Who Must File on page 1 says: "You received distributions from a traditional, SEP or SIMPLE IRA in 2002 (other than a rollover, conversion, recharacterization or return of certain contributions) and your basis in traditional IRAs is more than zero."

I received distributions from traditional IRAs with non-zero basis, BUT, the above statement says that I do not have to file the 8606 if the distribution was from a conversion, which mine was from traditional IRA to a Roth IRA.

The 3rd bullet says: "You converted an amount from a traditional, SEP, or simple IRA to a Roth IRA in 2002 (unless you recharacterized the entire conversion - see page 3) This is what I did! So, again it seems that I don't have to file Form 8606

Thanks again for your help.

Terry

I know that the explanation goes with the amounts on Line 16a as per the instructions.

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Author: pmarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 63980 of 120826
Subject: Re: Roth IRA recharacterization Date: 2/20/2003 5:32 AM
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I received distributions from traditional IRAs with non-zero basis, BUT, the above statement says that I do not have to file the 8606 if the distribution was from a conversion, which mine was from traditional IRA to a Roth IRA.

The 3rd bullet says: "You converted an amount from a traditional, SEP, or simple IRA to a Roth IRA in 2002 (unless you recharacterized the entire conversion - see page 3) This is what I did! So, again it seems that I don't have to file Form 8606


If I understand your situation, the only IRA distribution you had was a conversion to Roth which was subsequently recharacterized in full. If so, then you don't have to file the Form 8606; just attach your explanation.

Phil

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