How to Convert a Roth IRA Into a Regular IRA
Converting your Roth Individual Retirement Account into a regular IRA account is a process known as "recharacterization." If you choose to move your entire Roth into a regular IRA, the process is fairly straightforward, with a few tax forms to complete but no major calculations to be made. If you are converting only a portion of your Roth into a regular IRA, however, the computations can prove more elaborate and need to be performed correctly to avoid tax penalties.
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Instructions
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Determine if you want to convert. A traditional IRA is a pre-tax vehicle, while a Roth IRA is an after-tax account, so when you convert to a Roth you must pay income taxes on the entire amount of the transfer. However, your future withdrawals from your Roth will be tax-free. Usually, Roth contributions are converted back to traditional IRAs when the account value has dropped dramatically shortly after the transfer. Rather than owing the tax on the high transfer value, after a recharacterization you can consider a later Roth transfer when your account value, and potential tax liability, is not so high.
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Observe your deadlines. You must convert any Roth contributions to regular IRA contributions no later than your tax filing deadline. With the six-month automatic extension that the IRS grants on your tax filing, this is usually on or about Oct. 15 of the year following your Roth contribution. If you fail to meet this deadline, you can no longer make your conversion.
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Consult the appropriate IRS publications. Publication 590 gives an important overview of the Roth recharacterization procedure, but you should also study and complete IRS Form 8606, "Nondeductible IRAs." If you are only converting a portion of your Roth to a regular IRA, you will need to compute the gains (or losses) on this portion of your contribution, and Form 8606 will help you with these calculations. As they can be complex, you may require the services of a tax adviser.
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File your taxes. An important step in the recharacterization of a Roth IRA is ensuring that the IRS is made aware of your intentions. In addition to completing an accurate Form 8606, you should also attach a letter with your tax filing to indicate the specifics of your conversion. Include dates, amounts, and your intentions in the letter. If your recharacterization was partial, you must file Form 8606 with your taxes; otherwise, you can use it as a guide to keep for your own records.
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Tips & Warnings
While Form 8606 should help you compute the earnings on your partial Roth recharacterization, your IRA trustee or custodian should also be able to provide you with the correct amount.
