Undoing ROTH conversion

[nancy]

I have a client who converted to a ROTH at end of 1999 to avoid further minimum distributions. However, when she did this the bank did not tell her she would be taxed on the conversion. Now she wants to undo the conversion. Can this be done prior to April 15? What are the reporting requirements?

[Michael Devault]

I believe she can. Look at IRS Form 8606. I think this is the form used to report recharacterizations.

Hope this helps. Good luck!

[John G]

Yes she can. Last year all sorts of options and flexible deadlines were allowed because the Roth was new. This year it should revert to a once a year option to back out. Leave plenty of time for custodial actions, especially around tax deadlines.

But make sure you client understands that she will be taxed each time $$ come out of the standard IRA. If it is a modest IRA, it might be worth avoiding the annual nuiscance of the disbursements.

[Guest Jack L]

I contributed $2,000 for CY 2000, purchased stock which has decreased in value. Can I undo this tranaction? Or must I keep it and absorb the loss? What if my AGI exceeds the limit at the end of CY 2000?