You Asked Us - Roth Vs Traditional IRA

Q: If I make a contribution to my Traditional IRA and find out that I am ineligible to deduct the amount, how can I have it reversed and contributed to my Roth IRA?

A: You can change the character of your IRA contribution from a Traditional IRA contribution to a Roth IRA contribution by recharacterizing the amount. The recharacterization must include any net-income-attributable (NIA) to the contribution. This means that the amount recharacterized must have attributable earnings added or losses subtracted. This will, in effect, treat the contribution as if it was made initially to the Roth IRA. The original contribution will be reported on IRS Form 5498. For the recharacterization, a 1099-R will be issued for the amount moved from the Traditional IRA and a 5498 will be issued for the amount recharacterized to the Roth IRA.

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