Roth recharacterization - calculating taxable portion

[Guest Mallo]

Other than by going directly back to the stock prices for your IRA on the date of the reconversion, is there another way to calculate the taxable amount given the information only on the Form 5498? They report only the total of the distributions and I've heard the IRS wants a letter enclosed that tells them how you calculated the taxable portion. Do I simply say in the letter "That's how much those funds were worth on the date of the last(and in my case only)reconversion."? Seems too simplistic given that if that's the only way to calculate the taxable portion it will be the content of all letters. I guess I should say that mine is not a partial conversion.

Thanks for any help,

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mallo

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mallo

[Guest TYounkin]

Mallo, I am sympathetic with you. I also had to recharacterize (Trad to Roth and back to Trad) because our joint AGI unexpectedly went over the $100,000. From all the articles that I have read the IRS will look upon this as if nothing happened and you shouldn’t be taxed on any of the conversions or reconversions. Tax time this year was a nightmare. I had trouble with Turbo Tax so I went to the professionals. H&R Block’s computer software couldn’t do my taxes. I then went to Jackson Hewitt where it took one of the Hewitt founders and computer consultant to do my taxes for 1998. I also read that you should include a letter explaining in detail your recharacterization. Hopefully, the IRS will see that we acted in good faith when doing taxes this year. Afterall, some of the so called tax professionals could not even do it.