Skip to main content



tax columnist Tracy Byrnes and Martin Nissenbaum, national director of personal income-tax planning at Ernst &Young, for an hour-long Yahoo! chat on Tuesday, April 4, at 5 p.m. EDT. They'll cover everything from tax planning to e-filing. Register at: It's free!

I converted a traditional IRA to a Roth IRA and I got killed in the tech pullback. I have lost 30% in three weeks. I now don't want to pay taxes on the full conversion. Can I unconvert? -- Jesse Harris


I bet you thought you were asking a straightforward question. Well, here's a good rule of thumb: Anything involving the Roth is far from straightforward.

If you converted your traditional IRA to a Roth in 1999, you can recharacterize ("unconvert") your Roth back to a traditional IRA. You have until the due date of your tax return, including extensions, to take care of this for 1999.

You are allowed to flip-flop your Roth IRA account once a year. That means one conversion and one recharacterization. If you flip-flop more than that, the

Internal Revenue Service

will regard the additional transactions as taxable, says Maggie Doedtman, a senior tax-research and training specialist at

H&R Block

in Kansas City.

For 1999, you were allowed an additional flip and could reconvert again to the Roth as long as you did it on or before Dec. 31, 1999. But the rules have tightened up for 2000. (See

section 1.408A-5 of the tax regulations for more information on recharacterizing IRA contributions.)

No doubt we need an example here. So let's assume you converted your traditional IRA to a Roth in September 1999. You now owe ordinary income tax on the entire amount of that conversion on your 1999 tax return.

TheStreet Recommends

But then your Roth IRA got slapped by the tech slaughter at the end of March and now is worth much less than it was back in September. But you still owe tax on the value of the account on the day you converted. To avoid this tax smack, you can recharacterize your Roth IRA back to a traditional IRA by the time you file your tax return.

If, later in the year, you decide to convert back to the Roth again, that conversion will count for the 2000 tax year. But, as I mentioned, reconversion rules have been tightened up to keep people from timing the market and flipping back and forth.

Here's the new rule: If you convert to a Roth in the 2000 tax year then decide to recharacterize to an IRA, you may not convert back to a Roth before either the beginning of next the tax year or 30 days after the amount was recharacterized, whichever is later.

Fortunately, Doedtman has an example.

Let's say you convert to the Roth on June 30, 2000, and decide to recharacterize to a traditional IRA the following Oct. 1.

Before you can convert back to the Roth you have to check two dates: Jan 1, 2001 (beginning of the next tax year) or Oct. 31, 2000 (30 days after you recharacterized). Because you now must wait until the later of the two dates, you can't convert back to the Roth until Jan 1, 2001.

Check out our Roth IRA

reporting guide for details of how to report your recharacterization on

Form 8606

-- Nondeductible IRAs


A reminder: You have only until April 17 to make contributions to your traditional IRA or Roth IRA for the 1999 tax year.

Send your questions and comments to, and please include your full name. Tax Forum appears daily through April 17.

TSC Tax Forum aims to provide general tax information. It cannot and does not attempt to provide individual tax advice. All readers are urged to consult with an accountant as needed about their individual circumstances.