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Recharacterize a 2011 IRA Contribution After October 15? Probably Not

Monday October 15, 2012 was the deadline to recharacterize an IRA contribution for 2011. Now that we are past that date, is it possible to get an extension for time to do a recharacterization? Probably not.

ed slott recharacterization deadlineWhen you recharacterize, you essentially change your IRA contribution from one type of IRA to another. In most cases, a recharacterization involves reversing a Roth IRA conversion. Some or all of the conversion can be recharacterized with its net income attributable (gains or losses). A recharacterization can be done for any reason but certain rules must be followed. For example, both the Roth and the traditional IRA custodians must be notified of the recharacterization in writing and the recharacterization must be done as a trustee-to-trustee transfer (a direct transfer, not a withdrawal from the Roth IRA and a subsequent deposit to an IRA).

Even though the 2011 recharacterization deadline has passed, it might be possible to get more time to recharacterize. The IRS can give you more time beyond the standard October 15 deadline to recharacterize when, based on the facts and circumstances, you acted reasonably and in good faith. The IRS gives the extra time through a private letter ruling (PLR) request. In most of these PLRs, the taxpayers determined, after the October 15th deadline, that their conversions were not allowed because their income exceeded the $100,000 limit in years before 2010. However, the IRS fee for a Roth recharacterization is $4,000, not including professional fees to prepare a PLR request, which can run an additional $5,000 to $10,000.

From a practical standpoint, unless you can convince the IRS that you have an extenuating circumstance that warrants more to time to recharacterize and you can pay the $4,000 IRS fee plus the tax pro’s fee, you won’t get more time to recharacterize.

Article Highlights

  • The 2011 recharacterization deadline was October 15, 2012
  • IRS sometimes will give you more time to do a recharacterization
  • The IRS fee for a later recharacterization request (PLR) is $4,000 
- By Joe Cicchinelli and Jared Trexler


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Thursday's Slott Report Mailbag

Consumers: Send in Your Questions to [email protected]

Can I transfer money from my IRA to my husband's Roth IRA? I am 35, and he is 36.

Thank you!

Gail Clements

No. The only way your IRA funds can be transferred to your husband’s IRA is in a divorce or after your death. Even then, it would have to be transferred to a similar IRA, for example an IRA to IRA or a Roth IRA to another Roth IRA. In this case, you cannot transfer your IRA into your husband’s Roth IRA.