In 2013, I made a contribution to a traditional IRA. In January 2014, I requested that my broker recharacterize this contribution as a Roth IRA contribution. I received a 1099-R form that incorrectly treated the recharacterization as a conversion. What should I do?

ANSWER

The BIDaWIZ Team's Answer:

The most highly recommended option is of course to demand that the broker issue a correct 1099-R form. The IRS computers will immediately question the tax treatment of the recharacterization as the broker's 1099 reflects a conversion. Having said that, you can still treat the transaction as a recharacterization. You can complete Form 4852 as a substitute for an incorrect 1099-R form. The amounts of the substitute form can then be reflected on the key lines 15a and 15b on your form 1040. Please note that if the IRS doesn't agree with your claim, you can face penalties as discussed in the instructions to the form. You should have a documented paper trial to reflect your request to treat the transaction as a recharacterization. This is referenced in IRS Publication 590 & IRC Section 6721.