Roth IRA conversions and recharacterizations

IRA owners may convert a traditional IRA to a Roth IRA under certain circumstances without any penalties. An investor may "undo" a contribution or a conversion to a Roth IRA for 2017 and transfer money back to a traditional IRA account, provided this is done before the April 17, 2018 due date for 2017 federal income tax returns (or later extended due date). This process, known as a "recharacterization," can help an investor who:

  • Made a regular contribution to a Roth IRA and exceeded the adjusted gross income limit.
  • Is married, but after making Roth conversion, decided to file separately (adjusted gross income limits differ based on the type of income tax return filing).

An IRA owner who converts an amount from a traditional IRA to a Roth IRA and then transfers that amount back to the traditional IRA by means of a recharacterization may not reconvert that amount to another Roth IRA until either the next tax year following the year of conversion or, if later, the end of the 30-day period beginning on the date of the recharacterization. Among other requirements, a recharacterization must be accomplished by a "trustee-to-trustee transfer" of the contribution and be accompanied by any net income (earnings) allocable to the contribution.

Please note that Form 1099-R combines all IRA distributions in 2017 attributable to a single mutual fund, including each Roth IRA conversion and any recharacterizations. In order to prepare your taxes, you will need to know what portion of that combined total represented each transaction. For a more detailed summary of your IRA account activity, please refer to your 2017 year-end account statement. If you need a copy of your 2017 year-end statement, please call the Shareholder Service Center at 800 523-1918 weekdays 8:30am through 6:00pm Eastern time.

The information contained in the Tax Center is not intended to be legal or tax advice. If you need assistance preparing your tax return, please consult a tax advisor.

Information may be abridged and therefore incomplete. Any discussion pertaining to taxes in this communication (including attachments) may be part of the promotion or marketing of a product. Advice (if any) related to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code. Individuals should seek advice based on their own particular circumstances from an independent tax advisor.