If you converted a traditional IRA into a Roth account last year and are now unhappy with the results, you can reverse the conversion as long as you get it done by October 15th. Here’s what you need to know as this deadline rapidly approaches!
When you converted your traditional IRA into a Roth IRA last year, the transaction was treated as a distribution from the traditional IRA followed by a contribution of the distributed amount to the Roth account. So the conversion triggered a 2012 federal income tax bill (and maybe a state income tax bill, too) based on the traditional IRA’s value on the conversion date.
However, 1 taxpayer-friendly aspect of the Roth conversion drill is that individuals who use the calendar year for tax purposes have until October 15th of the year following the conversion year to reverse a conversion. For example, you have until October 15th of this year to reverse a 2012 conversion. That October 15, 2013 deadline applies whether or not you extended your 2012 Form 1040. Read more