a-99-104.pdf

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# Part IV. Items of General Interest

## Time for Recharacterizing 1998 IRA Contributions

## Announcement 99-104

### Purpose

The first year for which Roth IRAs could be established was
1998. It has come to the attention of the Internal Revenue
Service and Treasury that taxpayers have experienced particular
difficulty in properly applying the rules governing Roth IRA
conversion contributions and recharacterizations. In view of the
tax consequences of excess IRA contributions, the Service and
Treasury believe that additional time should be provided for
taxpayers who made 1998 Roth IRA conversion contributions or
other 1998 IRA contributions and who would like to recharacterize
those contributions.

This announcement provides relief to taxpayers who would
like to recharacterize 1998 IRA contributions, including amounts
contributed to Roth IRAs as conversions when the taxpayers were
not eligible. Pursuant to this announcement, these taxpayers
have until the end of 1999 to recharacterize their 1998 IRA
contributions.

### Background

Section 408A (d) (6) of the Internal Revenue Code and
§ 1.408A-5 of the regulations provide that, except as otherwise
provided by the Secretary, a taxpayer may elect to recharacterize
an IRA contribution made to one type of IRA as having been made
to another type of IRA by making a trustee-to-trustee transfer of
the IRA contribution, plus earnings, to the other type of IRA.
In a recharacterization, the IRA contribution is treated as
having been made to the transferee IRA and not the transferor
IRA. Under § 408A(d) (6) and § 1.408A-5, this recharacterization
election generally must occur on or before the date prescribed by
law, including extensions, for filing the taxpayer's Federal
income tax return for the year of the contribution.

Section 1.408A-5, Q&A-6, describes how a taxpayer makes the
election to recharacterize an IRA contribution. To
recharacterize an amount that has been converted from a
traditional IRA to a Roth IRA: (1) the taxpayer must notify the

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Roth IRA trustee of the taxpayer's intent to recharacterize the
amount, (2) the taxpayer must provide the trustee (and the
transferee trustee, if different from the transferor trustee)
with specified information that is sufficient to effect the
recharacterization transfer, and (3) the trustee must make the
transfer.

Section 301.9100-2 (b) of the regulations generally provides
for an automatic extension of 6 months from the due date of a
return, excluding extensions, to make elections that otherwise
must be made by the due date of the return or the due date of the
return plus extensions, provided (1) the taxpayer's return was
timely filed for the year the election should have been made and
(2) the taxpayer takes appropriate corrective action within this
6-month period. Announcement 99-57, 1999-24 I.R.B. 50 (June 14,
1999) describes the application of § 301.9100-2 (b) to
recharacterization elections.

### Extension of Time to Recharacterize 1998 IRA Contributions

Pursuant to $ 408A (d) (6), a taxpayer will be deemed to have
timely made an otherwise valid recharacterization of a 1998 IRA
contribution, including a Roth IRA conversion for which the
taxpayer was not eligible, if (1) the recharacterization occurs
on or before December 31, 1999, (2) the taxpayer timely filed his
or her 1998 Federal income tax return, and (3) the taxpayer files
an amended 1998 return if the recharacterization is not properly
reflected on the previously filed return.

Effect on Other Documents

Announcement 99-57 is modified.