What is a recharacterization of a rollover or a conversion?
A recharacterization allows you to “undo” or “reverse” a rollover or conversion to a Roth IRA. You generally tell the trustee of the financial institution holding your Roth IRA to transfer the amount to a traditional IRA (in a trustee-to-trustee or within the same trustee). If you do this by the due date for your tax return (including extensions), you can treat the contribution as made to the traditional IRA for that year (effectively ignoring the Roth IRA contribution).
For details, see “Recharacterizations” in Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs).
How can I recharacterize an amount rolled over to a Roth IRA from an employer-sponsored retirement plan?
You can only recharacterize amounts rolled into a Roth IRA from an employer-sponsored retirement plan by transferring them to a new or existing traditional IRA, and not back into the plan from which they were distributed.
What is the deadline to recharacterize a Roth rollover or conversion?
You generally can recharacterize your rollover or conversion by October 15 of the following year, regardless of whether you requested an extension to file your tax return. For example, for your conversion to a Roth IRA in 2013, you have until October 15, 2014, to recharacterize. This deadline applies even if:
- you did not request an extension to file your 2013 tax return, and
- you file your return on or before April 15, 2014.
Is there a minimum waiting period to reconvert the money to a Roth IRA following a recharacterization?
Yes, if you recharacterize all or part of a rollover or conversion to a Roth IRA, you cannot reconvert the amount recharacterized to the same or another Roth IRA until the later of:
- 30 days after the recharacterization, or
- the year following the year of the rollover or conversion.
The waiting period to convert applies only to amounts you recharacterized. For example, you can convert amounts from a different traditional IRA to a Roth IRA immediately.
What if I recharacterize a Roth rollover or a conversion that I already reported on my income tax return?
If you have already filed your return, you can file an amended return and subtract the amount recharacterized from the taxable amount of the rollover or conversion reported on your original return. Form 1040X, Amended U.S. Individual Income Tax Return (instructions), can be used to amend your return. Generally, for a credit or refund, you must file Form 1040X by the later of:
- three years (including extensions) after the date you filed your original return, or
- within two years after the date you paid the tax.