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Deadline for Recharacterization of Your 2010 Roth Conversions is October 17, 2011

Are you having second thoughts about your 2010 Roth Conversion?

If the answer to that question is "YES," you may want to consider a recharacterization of part or all of the amount that you converted in 2010 from your IRA or qualified plan.

Reasons for Recharacterizing

• The converted amount has lost market value. A drop in market value results in a tax liability on assets that have been devalued. With the current "market drop" taxpayers may want to consider a "do-over."
• Inability to pay taxes on the conversion. Remember 2010 conversion income is taxed on 2011 and 2012 returns.
• Elected to pay the conversion tax with the 2010 return but now need the money.
• Conversion will result in a higher tax bracket.
• Conversion will cause Alternative Minimum Tax.
• Conversion will trigger a future surcharge on Medicare Part B premium.
• No reason; a change of mind, strategy, needs, or timing has occurred.

Aspects of Recharacterization

• Partial recharacterizations are permitted.
• "Cherry-picking" assets in the account for recharacterization is not permitted.
• A net income attributable (NIA) calculation must be done on partial recharacterizations.
• A total recharacterization returns the original amount plus earnings to a traditional IRA, as if the conversion never happened.
• Ability to amend for a refund if elected to pay the tax on the 2010 conversion
• Losses in account value are not-deductible on recharacterization.

If you want to understand the tax consequences of your specific recharacterization and/or reconversion, please contact  Darin G. Schindler, CPA, CSEP, CR.FA. or your Alpern Rosenthal Tax Advisor.

The deadline to recharacterize a 2010 conversion is October 17, 2011. If you are going to recharacterize, contact your broker or trustee, as their deadline to make changes to your account may be earlier to give them time to process requests. Facebook For the latest tax updates, follow us on Twitter at http://twitter.com/alpernrosenthal

For the latest tax updates, follow us on Twitter at http://twitter.com/alpernrosenthal