Roth IRAs.IR-1999-78 provides that taxpayers have until the end of 1999 to change Roth individual retirement account (IRA Ira, in the Bible Ira (ī`rə), in the Bible. 1 Chief officer of David. 2, 3 Two of David's guard. IRA, abbreviation IRA. ) contributions or conversions for 1998 back to traditional IRAs. This is significant for taxpayers who converted, but later discovered they were ineligible. Taxpayers who filed their returns timely had until Oct. 15, 1999 to make such recharacterizations. The IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. is extending this deadline to Dec. 31, 1999; the additional time gives taxpayers a chance to avoid adverse consequences (e.g., paying both regular and early-distribution taxes on the amounts involved). The IRS is sending letters to about 20,000 taxpayers who appear to be ineligible for the Roth IRA conversions Roth IRA Conversion A reportable movement of assets from a Traditional, SEP or SIMPLE IRA to a Roth IRA. The movement of assets may be taxable. Notes: A conversion may be accomplished by a rollover of assets directly between the trustees of the Traditional and Roth IRAs, reported on their 1998 returns. The letter advises these taxpayers to take corrective action A corrective action is a change implemented to address a weakness identified in a management system. Normally corrective actions are instigated in response to a customer complaint, abnormal levels if internal nonconformity, nonconformities identified during an internal audit or if they were ineligible to make the conversion. To recharacterize a 1998 Roth IRA Roth IRA An individual retirement plan that bears many similarities to the Traditional IRA. Contributions are never deductible, and qualified distributions are tax-free. A qualified distribution is one that is taken at least five years after the taxpayer established his/her first contribution or conversion, a taxpayer must take the necessary corrective action with his Roth IRA trustee by Dec. 31, 1999. The taxpayer will generally have until April 15, 2002, to file an amended tax return showing the proper result. For more information, see "Tax Clinic" p. 833, this issue. |
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