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I need to undo a Roth Conversion and one of the brokerage firms involved is unhelpful. The IRA accounts in question were at Schwab for years. On June 16, 2013 funds from a traditional IRA were converted to the Roth while the accounts were at Schwab. In July 2013 the accounts were transferred to Vanguard.

My situation exactly matches Example 1 on page 4 of Notice 2009-39
http://www.irs.gov/pub/irs-drop/n-00-39.pdf

Vanguard says I must obtain a recharacterization from Schwab for the period the Roth funds were at Schwab, which is understandable. But the folks at Schwab promise action and do nothing.

Is there any legal or IRS requirement that the recharacterization information must come from Schwab? What I am considering is I collect the data for the period the funds were held at Schwab and fill out the Vanguard forms.
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Vanguard says I must obtain a recharacterization from Schwab for the period the Roth funds were at Schwab, which is understandable. But the folks at Schwab promise action and do nothing.
...
Is there any legal or IRS requirement that the recharacterization information must come from Schwab? What I am considering is I collect the data for the period the funds were held at Schwab and fill out the Vanguard forms.


Ultimately the responsibility falls on you. There is no requirement that you have a third-party calculation of the recharacterization. It seems to me that there's only one number you need from Schwab--the value of the Roth account before the conversion. The confirmation of the conversion should have that, or what you need to back into it.

What am I missing?

Phil
Rule Your Retirement Home Fool
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Vanguard says I must obtain a recharacterization from Schwab for the period the Roth funds were at Schwab, which is understandable. But the folks at Schwab promise action and do nothing.
...
Is there any legal or IRS requirement that the recharacterization information must come from Schwab? What I am considering is I collect the data for the period the funds were held at Schwab and fill out the Vanguard forms.
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Ultimately the responsibility falls on you. There is no requirement that you have a third-party calculation of the recharacterization. It seems to me that there's only one number you need from Schwab--the value of the Roth account before the conversion. The confirmation of the conversion should have that, or what you need to back into it.

What am I missing?

Phil
Rule Your Retirement Home Fool

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I think what's being missed (by all involved, except maybe Vanguard) is that what Schwab has to do is make a memo entry in their records to record the fact of the recharacterization of the Roth account back to a trad. IRA. That much is needed, and nothing more. They no longer have the funds there, so it probably seems like a strange request.

Would have been better to transfer funds first, and then do the Roth conversion at Vanguard.

Bill
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Bill I agree it would have been better to use your sequence - but I had no idea I was going to move the funds when the conversion happened (we fired a financial advisor). To get the funds I wanted, it was necessary to have accounts at Vanguard. And finally there would have been no desire for the re-conversion had I not stupidly sold a large capital gain holding in a taxable account.
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Bill I agree it would have been better to use your sequence - but I had no idea I was going to move the funds when the conversion happened (we fired a financial advisor). To get the funds I wanted, it was necessary to have accounts at Vanguard. And finally there would have been no desire for the re-conversion had I not stupidly sold a large capital gain holding in a taxable account.
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Don't kick yourself too hard about gains. We should all be so stupid.

Bill
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I think what's being missed (by all involved, except maybe Vanguard) is that what Schwab has to do is make a memo entry in their records to record the fact of the recharacterization of the Roth account back to a trad. IRA.

Why? IMO it's of no concern to OP what Schwab's books look like, although I'd suspect that Schwab did what you're suggesting at the time of the recharacterization. They just don't want to be bothered doing favors for a former customer.

To calculate the amount to be sent to the traditional IRA in a recharacterization you need to know

1. The amount converted
2. The value of the Roth immediately before conversion.
3. The value of the Roth immediately before the recharacterization.

OP should have all these numbers at hand. I don't know what the Vanguard worksheet wants, but it should be something along the lines of Worksheet 1-3 on page 32 of Pub 590.

Phil
Rule Your Retirement Home Fool
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Why? IMO it's of no concern to OP what Schwab's books look like, although I'd suspect that Schwab did what you're suggesting at the time of the recharacterization. They just don't want to be bothered doing favors for a former customer
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I'm sure that's true - that they don't want to be bothered spending time on a former customer.

But I think the OP is right to want his statements, 1099-Rs, and 5498 at year-end to reflect the actual situation - and I give him credit for thinking about it now, rather than next Feb. 15.

Bill
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I think the OP is right to want his statements, 1099-Rs, and 5498 at year-end to reflect the actual situation - and I give him credit for thinking about it now, rather than next Feb. 15.

I don't recall OP expressing any concern at all about those documents, nor do I see a reason to have any.

Schwab will issue a 1099-R for the traditional IRA showing the conversion. They may, but are not required to, issue 1099-R's for the direct transfer of the accounts to Vanguard. Schwab will issue a 5498 for the Roth account showing the conversion amount. The custodian reports nothing, nada, zilch, bupkes about recharacterizations. That's why the taxpayer attaches a statement to the 1040 telling the story. Check out the instructions for line 15 of the 1040 and the 8606.

Phil
Rule Your Retirement Home Fool
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