Should i recharacterize my roth ira

My son got married in and contributed to a Roth IRA. But when he and his wife were doing their taxes, they discovered that their joint income was over the Roth income limit. Is there anything he can do to avoid paying a penalty? But you can avoid the penalty if you withdraw your contributions and any earnings on those contributions by April 15, That deadline stretches to October 15, if you file an extension, which can be a good idea if you're making changes at this late date.

The withdrawal of contributions is tax-free, but you must include the earnings on the contributions as income for the year you made the contributions. People who miss the deadline could still recharacterize their contribution if they got a private letter ruling from the IRS, but that is a time consuming and expensive route to take.

You are not allowed to do so by a day rollover. The recharacterized amount is the total dollar amount of the contribution you wish to undo.

But the total funds transferred must also include the earnings or losses that are attributable to the recharacterized amount. Form is filed with your tax return, but you need not file form for full recharacterizations. Since a failure to calculate and report your recharacterizations could have consequences , make sure you consult with a competent tax professional for assistance with making the right choices for you. Also, be sure to submit your recharacterization instructions to your Roth IRA custodian in advance of the deadline.

Internal Revenue Service. Accessed April 15, Individual Income Tax Return. Accessed April 16, United States Congress. Roth IRA. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page. These choices will be signaled globally to our partners and will not affect browsing data.

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Personal Finance Retirement Planning. What Is Recharacterization? The process of recharacterization was banned in under the Tax Cuts and Jobs Act. Recharacterization allowed for a chance to reduce one's tax liability of a Roth IRA conversion. Recharacterization provided flexibility allowing time to determine the tax liability for the year prior and how to get favorable tax treatment. Article Sources. Investopedia requires writers to use primary sources to support their work.

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