Thinking about moving your retirement money to a Roth IRA?
Be careful before you do!
You see, when you convert a traditional IRA to a Roth IRA, and then reverse the transaction (by switching the account back to traditional IRA status), the reversal is characterized by the IRS as a “recharacterization.”
If you have a sizable accumulation in your traditional IRA, the ability to convert it to a Roth IRA and then reverse course later, was a terrific tax and financial planning break.
IMPORTANT: If you make a Roth conversion transaction in 2018 and beyond, the Tax Cuts and Jobs Act eliminates your ability to recharacterize your account back to traditional IRA status.
Want to learn more about what you can and can’t do with recharacterizations? Read my new article titled Tax Tips: Be Alert to the TCJA Tax Reform Attack on IRA Recharacterizations!
Three ways our fact-filled article can help you:
- You’ll learn what to do if you want to recharacterize (reverse) a 2017 Roth IRA conversion. Good news. There’s still time to recharacterize a 2017 Roth IRA conversion but you must get it done by October 15, 2018. You accomplish this reversal by using a trustee-to-trustee transaction that we’ll explain when you read the full after-tax-reform article.
- You’ll learn about other kinds of IRA recharacterizations that are still allowed. For 2018 and beyond, you can make a contribution (for a year) to a Roth IRA. And before the due date of your individual income-tax return for that year, you can recharacterize it as a contribution to a traditional IRA. We’ll give you all the details when read the full after-tax-reform article.
- We’ll explain another strategy you can use. You can still make a contribution (in 2018 and beyond) to a traditional IRA and convert it to a Roth IRA. BUT … be aware that the IRS won’t let you reverse the conversion through a recharacterization. All will be explained when you read the full article.