How do I claim a recharacterization of an IRA?
A recharacterization of an IRA occurs when you convert a contribution from one type of IRA (such as a traditional IRA) to another (such as a Roth IRA) or vice versa, typically through a trustee-to-trustee transfer. This process allows you to correct an incorrect contribution type or adjust your tax strategy.
Steps to Claim a Recharacterization
- Report on Form 1040 (or 1040-SR/1040-NR): If the recharacterization occurred in 2025, include the amount transferred from the traditional IRA on line 4a of your 2025 Form 1040, 1040-SR, or 1040-NR.
- Attach a Statement: Always attach a statement to your tax return explaining the recharacterization. Include details such as the original contribution date, amount, and the date and amount of the recharacterization.
- Form 8606 Reporting:
- If you recharacterized part or all of a traditional IRA contribution to a Roth IRA, report the nondeductible portion (if any) on Form 8606, Part I.
- If you recharacterized a Roth IRA contribution back to a traditional IRA, report the nondeductible portion (if any) on Form 8606, Part I. The Roth IRA contribution itself is not reported on Form 8606.
- Reporting by Trustee: The trustee of the original IRA must report the recharacterization as a distribution on Form 1099-R and report the new contribution on Form 5498.
Recharacterization Codes
For reporting purposes, use the following codes on Forms 1099-R and 5498:
- Code N: Recharacterized IRA contribution made for 2025 and recharacterized in 2025.
- Code R: Recharacterized IRA contribution made for 2024 or a prior year and recharacterized in 2025.
Important Notes
- Recharacterizations must be completed by the tax filing deadline (including extensions) for the year of the original contribution.
- Participants may recharacterize contributions made for a prior year if the IRS provides tax relief (e.g., due to a federally declared disaster).
- Use Publication 590-A and Publication 590-B for guidance on IRA types and rules. Refer to Table I-1 in these publications to determine which sections apply to your situation.
Source:
Publication 590-A
Publication 590-B
Form 8606
Form 1099-R
Form 5498
Disclaimer: Always verify details with the official IRS forms and instructions or consult with a tax professional. OLT (Online Taxes) provides guidance based on retrieved information but does not guarantee accuracy for individual circumstances.