Recharacterize - list contrib & date?

[Guest amfam2]

We are revising the forms we give our customers who elect to Recharacterize their IRA contributions.

As part of the customer's notification requirements to the financial institution, they are required to list each contribution they want recharacterized (within the same IRA) and the date it was contributed.

Some of our customers elect automatic monthly (or quarterly) deduction.

We're considering adding a line to our Recharacterization form which states: please list each contribution amount you want recharacterized, and the date of contribution. If this box is left blank, we will process the recharacterization according to LIFO (last in first out).

In your opinion, is this option allowable under the regs?

Has anyone else ran into this type of situation? How do you handle?

[Appleby]

For IRA contributions, if multiple contributions are made to the IRA, the last contribution is deemed to be removed as a “return of excess” (IRS Notice 2000-39-Attached). There is no guidance on recharacterizations, however, I see no reason why you cannot borrow from the contribution rules and default to LIFO, providing you make it very clear and highly visible on your recharacterization request form.

You may get complaints from some customers who could be recharacterizing contributions they now (during tax filing season) find out they are ineligible to make or deduct. Quite often, these are contributions for the prior years, especially for IRA owners who make contributions in the manner you describe, systematically/automatically on a periodic basis.

Notice__2000_39.pdf