Failed Conversion

[Randy Watson]

IRS determined that there was a failed Roth conversion. The IRA provider is seeking guidance from the retiree on how to proceed. Shouldn't they know how to proceed in this case?

It seems like the IRA provider would simply recharacterize (retroactively) the Roth as a personal brokerage account with no favorable tax status. What else do they have to do?

[jevd]

What is the reason for the failed conversion? How long ago was the transaction?

What was the type of the original account? Traditional IRA , Qualified Plan etc?

How old is the client? Under/Over 59 1/2?

If a traditional IRA, then re-characterize back to original IRA possibly. Client may simply want to withdraw the account rather than re-characterize.

[Randy Watson]

What is the reason for the failed conversion? How long ago was the transaction?

What was the type of the original account? Traditional IRA , Qualified Plan etc?

How old is the client? Under/Over 59 1/2?

If a traditional IRA, then re-characterize back to original IRA possibly. Client may simply want to withdraw the account rather than re-characterize.

The amounts went directly from a QP to a traditional IRA, then to the Roth. The transaction was years ago and outside the window of opportunity to recharacterize it, but not so long ago that it is protected by the SOL. The retiree is well over 59-1/2.

[jevd]

What is the reason for the failed conversion? How long ago was the transaction?

What was the type of the original account? Traditional IRA , Qualified Plan etc?

How old is the client? Under/Over 59 1/2?

If a traditional IRA, then re-characterize back to original IRA possibly. Client may simply want to withdraw the account rather than re-characterize.

The amounts went directly from a QP to a traditional IRA, then to the Roth. The transaction was years ago and outside the window of opportunity to recharacterize it, but not so long ago that it is protected by the SOL. The retiree is well over 59-1/2.

Is it possible to consider a portion of it as an eligible Roth annual contribution for that year and subsequent years and only pay the excess contribution penalities? If the reason was a MAGI issue, then the only possibility may be to remove it as an excess after tax filing date. Penalties would still be involved.