Life and Death Planning for Retirement Benefits

Chapter 5: Roth Retirement Plans

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recharacterizing the account, he can recharacterize just the Roth IRA that holds that asset class, and leave the other Roth IRAs alone. If using this strategy, the assets can be moved from a single traditional IRA directly into the multiple destination Roth IRAs; it is not necessary to first divide the assets into multiple traditional IRAs then convert those.

Deadline for Roth IRA contributions and conversions

The various deadlines for contributions, conversions, corrective distributions, and recharacterizations are extremely confusing. Some deadlines are based on the calendar year end, some on the extended due date of the return, and some on the unextended due date; and some of the deadlines qualify for an automatic extension—but you do not get the “automatic” extension unless you ask for it! A. Deadline for “regular” contribution. Starting with the easiest one: The deadline for making a regular contribution to a Roth IRA ( ¶ 5.3.02 ) for a particular year is the same as the deadline for contributing to a traditional IRA, i.e., the unextended due date of the tax return for that year, in other words, for most people, April 15 following the year in question. Reg. § 1.408A-3 , A-2(b), § 219(f)(3) . For example, a contribution “for” the year 2009 may be made at any time after December 31, 2008, and before April 16, 2010. When a participant makes a regular IRA contribution between January 1 and April 15, the IRA provider must ask which year it is for, since between those dates it could be for either the year in which the contribution occurs or the prior year. The deadline for filing an individual’s income tax return is the 15th day of the fourth month following the end of the individual’s taxable year. § 6072(a) . That means April 15th for most people. However, the actual deadline will be a bit later if April 15th falls on a weekend or holiday. § 7503 . Also, the deadline may be extended for individuals in an area affected by a disaster; and of course the deadline is different for an individual whose taxable year is not the calendar year. In this book, “April 15” is used as shorthand for “the unextended due date of the individual’s income tax return for the year in question, whatever that may be.” B. Deadline for “conversion” contribution. Conversions are slightly more complicated. Because the conversion is technically a “rollover” (see ¶ 5.4.03 (A), ¶ 5.4.04 (A)), a conversion contribution is tied to the traditional plan distribution that is being “rolled over.” Therefore a Roth IRA conversion that is supposed to be “for” the year 2010 must be tied to a distribution that occurs in the calendar year 2010. The due date of the 2010 return is irrelevant. A distribution made from a traditional plan in the calendar year 2010, if it is to be contributed to a Roth IRA, must be so contributed within 60 days after the date of the distribution. Reg. § 1.408A-4 , A-1(b)(1). See § 402(c)(3)(A) , § 408(d)(3) , and ¶ 2.7 . The ability to recharacterize a “Year 1” IRA contribution until October 15 of “Year 2” (see ¶ 5.6.02 ) does not create an extended right to do Roth conversions between January 1 and October 15 of Year 2 that will count as Year 1 conversions. Meaning of “April 15”