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#6
01-26-2008, 08:07 PM
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 Re: how does IRA recharacterization tax work? On Jan 26, 1:59*am, "Phil Marti" <prm20...[at]verizon.net> wrote: - quote - > <krear...[at]gci.net> wrote: > > Thanks! What are advantages/disadvantages of both actions? *If I > > recharacterized the money in a Traditional IRA I would be able to > > deduct this money, right? > Maybe. *The result of recharacterization is that the $4,000 is treated as a > traditional IRA contribution rather than a Roth. *See Chapter 1 of IRS > Publication 590 to see if it would be deductible in your specific case. > If it is deductible, that's the way I'd go, rather than a straight > withdrawal. > -- > Phil Marti > Clarksburg, MD > -- > << ------------------------------------------------------- > > << The foregoing was not intended or written to be used, * > > << nor can it used, for the purpose of avoiding penalties *> > << that may be imposed upon the taxpayer. * * * * * * * * *> > << * * * * * * * * * * * * * * * * * * * * * * * * * * * * > > << * The Charter and the Guidelines for submitting posts * > > << *to this newsgroup as well as our anti-spamming policy *> > << * * * * * * * * *are atwww.asktax.org. * * * * * * * * > > << * * * * Copyright (2007) - All rights reserved. * * * * > > << ------------------------------------------------------- > Thank you for your input, it has been very helpful! -- << ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- > |
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#5
01-26-2008, 09:59 AM
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| Re: how does IRA recharacterization tax work? <krearden[at]gci.net> wrote: - quote - > Thanks! What are advantages/disadvantages of both actions? If I
Maybe. The result of recharacterization is that the $4,000 is treated as a> recharacterized the money in a Traditional IRA I would be able to > deduct this money, right? traditional IRA contribution rather than a Roth. See Chapter 1 of IRS Publication 590 to see if it would be deductible in your specific case. If it is deductible, that's the way I'd go, rather than a straight withdrawal. -- Phil Marti Clarksburg, MD -- << ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- > |
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#4
01-26-2008, 02:39 AM
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| Re: how does IRA recharacterization tax work? On Jan 24, 7:15*pm, "Phil Marti" <prm20...[at]verizon.net> wrote: - quote - > <krear...[at]gci.net> wrote:
recharacterized the money in a Traditional IRA I would be able to> > I contributed $8000 to my Roth IRA last year on the same day (before > > April 15th): $4000 for 2006 and $4000 for 2007. > > My 2007 modified adjusted gross income exceeded the limit to be > > eligible to contribute to the Roth IRA for 2007. > > My Roth IRA lost money this year - went from a market value of $8000 > > to a market value of $7500. > > What now? > > Here are the options I have investigated with financial professionals: > > 1. Recharacterize my account for the money put in for 2007 from a Roth > > IRA to a Traditional IRA > > 2. Take out the $4000 I invested for 2007 with no tax penalty (because > > I lost money and I already paid taxes on the $4000 I originally put > > in). > Recharacterization and withdrawal are your two options for avoiding a > penalty. *In either case the amount will be less than $4,000 since your > earnings were negative. *See IRS Publication 590. > -- > Phil Marti > Clarksburg, MD > -- > << ------------------------------------------------------- > > << The foregoing was not intended or written to be used, * > > << nor can it used, for the purpose of avoiding penalties *> > << that may be imposed upon the taxpayer. * * * * * * * * *> > << * * * * * * * * * * * * * * * * * * * * * * * * * * * * > > << * The Charter and the Guidelines for submitting posts * > > << *to this newsgroup as well as our anti-spamming policy *> > << * * * * * * * * *are atwww.asktax.org. * * * * * * * * > > << * * * * Copyright (2007) - All rights reserved. * * * * > > << ------------------------------------------------------- > Thanks! What are advantages/disadvantages of both actions? If I deduct this money, right? -- << ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- > |
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#3
01-25-2008, 03:15 AM
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| Re: how does IRA recharacterization tax work? <krearden[at]gci.net> wrote: - quote - > I contributed $8000 to my Roth IRA last year on the same day (before
Recharacterization and withdrawal are your two options for avoiding a> April 15th): $4000 for 2006 and $4000 for 2007. > My 2007 modified adjusted gross income exceeded the limit to be > eligible to contribute to the Roth IRA for 2007. > My Roth IRA lost money this year - went from a market value of $8000 > to a market value of $7500. > What now? > Here are the options I have investigated with financial professionals: > 1. Recharacterize my account for the money put in for 2007 from a Roth > IRA to a Traditional IRA > 2. Take out the $4000 I invested for 2007 with no tax penalty (because > I lost money and I already paid taxes on the $4000 I originally put > in). penalty. In either case the amount will be less than $4,000 since your earnings were negative. See IRS Publication 590. -- Phil Marti Clarksburg, MD -- << ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- > |
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#2
01-25-2008, 01:46 AM
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| Re: how does IRA recharacterization tax work? On Jan 23, 11:50*am, Rich Carreiro <rlc-n...[at]rlcarr.com> wrote: - quote - > "rick++" <rick...[at]hotmail.com> writes:
details:> > Say you put $4000 in Roth IRA. > > But later on you had to transfer it back into a traditional > > IRA along with its fraction of earnings - say a $4500 > > transfer. *So should the the $500 earnings then be > > taxed and the whole $4500 added to the IRA basis? > > What IRS form is filed for this? > When you recharacterize an annual contribution, it is treated as if > the contribution were made originally to the IRA it was > recharacterized into. > So in your example, the recharacterization means the ultimate outcome > is the same (for tax purposes) as if you put the $4000 in the trad IRA > in the first place. *So the $500 is NOT taxed (because in theory you > would have made that same $500 within the trad IRA if the contribution > went to the trad IRA in the first place). > There's no IRS form to report this on (unless the recharacterized > contribution to the trad IRA is not deductible, in which case you'd > use 8606 to report the non-ded contribution, same as if you had made > a non-ded trad IRA contribution in the first place). > -- > Rich Carreiro * * * * * * * * * * * * * *rlc-n...[at]rlcarr.com > -- > << ------------------------------------------------------- > > << The foregoing was not intended or written to be used, * > > << nor can it used, for the purpose of avoiding penalties *> > << that may be imposed upon the taxpayer. * * * * * * * * *> > << * * * * * * * * * * * * * * * * * * * * * * * * * * * * > > << * The Charter and the Guidelines for submitting posts * > > << *to this newsgroup as well as our anti-spamming policy *> > << * * * * * * * * *are atwww.asktax.org. * * * * * * * * > > << * * * * Copyright (2007) - All rights reserved. * * * * > > << ------------------------------------------------------- > Informative answer! I have a similar question and here are the I contributed $8000 to my Roth IRA last year on the same day (before April 15th): $4000 for 2006 and $4000 for 2007. My 2007 modified adjusted gross income exceeded the limit to be eligible to contribute to the Roth IRA for 2007. My Roth IRA lost money this year - went from a market value of $8000 to a market value of $7500. What now? Here are the options I have investigated with financial professionals: 1. Recharacterize my account for the money put in for 2007 from a Roth IRA to a Traditional IRA 2. Take out the $4000 I invested for 2007 with no tax penalty (because I lost money and I already paid taxes on the $4000 I originally put in). Any comments? Thanks -- << ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- > |
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#1
01-23-2008, 07:50 PM
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| Re: how does IRA recharacterization tax work? "rick++" <rick303[at]hotmail.com> writes: - quote - > Say you put $4000 in Roth IRA.
When you recharacterize an annual contribution, it is treated as if> But later on you had to transfer it back into a traditional > IRA along with its fraction of earnings - say a $4500 > transfer. So should the the $500 earnings then be > taxed and the whole $4500 added to the IRA basis? > What IRS form is filed for this? the contribution were made originally to the IRA it was recharacterized into. So in your example, the recharacterization means the ultimate outcome is the same (for tax purposes) as if you put the $4000 in the trad IRA in the first place. So the $500 is NOT taxed (because in theory you would have made that same $500 within the trad IRA if the contribution went to the trad IRA in the first place). There's no IRS form to report this on (unless the recharacterized contribution to the trad IRA is not deductible, in which case you'd use 8606 to report the non-ded contribution, same as if you had made a non-ded trad IRA contribution in the first place). -- Rich Carreiro rlc-news[at]rlcarr.com -- << ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- > |
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01-23-2008, 07:32 PM
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| Re: how does IRA recharacterization tax work? rick++ wrote: - quote - > Say you put $4000 in Roth IRA. http://www.fairmark.com/rothira/rcrules.htm> But later on you had to transfer it back into a traditional > IRA along with its fraction of earnings - say a $4500 > transfer. So should the the $500 earnings then be > taxed and the whole $4500 added to the IRA basis? > What IRS form is filed for this? Kaye Thomas explains it very well at -- << ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- > |
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#-1
01-23-2008, 05:56 PM
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| how does IRA recharacterization tax work? Say you put $4000 in Roth IRA. But later on you had to transfer it back into a traditional IRA along with its fraction of earnings - say a $4500 transfer. So should the the $500 earnings then be taxed and the whole $4500 added to the IRA basis? What IRS form is filed for this? -- << ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- > |
| Tags |
| ira, recharacterization, tax, work |
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