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IRS provides transition relief for recharacterization of 2017 Roth IRA conversions

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Tax Hot Topics newsletterThe IRS provided guidance in frequently asked questions on the changes to Roth IRA recharacterizations made by tax reform legislation enacted at the end of 2017.

Prior tax law allowed individuals to convert an amount from a traditional IRA to a Roth IRA, and then reconvert the amount back to a traditional IRA, thereby unwinding the original conversion. The reconversion was previously allowed any time up to the due date of the individual’s tax return (including extensions) for the year of the original conversion.

Effective Jan. 1, 2018, conversions to a Roth IRA from a traditional IRA, SEP, or SIMPLE plan cannot be recharacterized back to the former plan. Additionally, amounts rolled over to Roth IRAs from other retirement plans, such as Section 401(k) or 403(b) plans, may not be recharacterized back to the former plan.

The IRS provides transition relief for Roth IRA conversions made in 2017, allowing a recharacterization to a traditional IRA if the recharacterization is made by Oct. 15, 2018.

Contact Eddie Adkins
Partner, Washington National Tax Office
T +1 202 521 1565

Jeffrey Martin
Partner, Washington National Tax Office
T +1 202 521 1526

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