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March 7, 2009

NIA Calculation Worksheet for Recharacterization of an IRA contribution

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Important: The Tax Cuts and Jobs Act of 2017 repealed the option to recharacterize Roth conversions, for Roth conversions done after 2017. As such, only regular contributions to traditional IRAs and Roth IRAs may now be recharacterized.

Steps
What to do
How it is done
Input results here
Step 1:
Calculate the adjusted closing balance
  • Determine the value of the IRA- whether traditional or Roth ( to which the contribution was made) at the end of the computation period
  • Add any transfers that were made from the that IRA during the computation period
  • Add any distributions made from that IRA during the computation period
  • Add any recharacterizations of contributions  made from the IRA during the computation period
Step 2:
Calculate the adjusted opening balance
  • Determine the value of the IRA at the beginning of the computation period
  • Add any transfers that were made to the IRA during the computation period
  • Add any contributions , including recharacterized contributions made to the IRA during the computation period
Step 3:
Subtract the adjusted closing balance from the adjusted opening balance
Adjusted closing balance – adjusted opening balance
Step 4:
Divide the results from step 3 by the adjusted opening balance
(Adjusted closing balance – adjusted opening balance)
Adjusted opening balance
Step 5:
Multiply the results from step 4 by the Roth conversion amount that is being recharacterized
(Adjusted closing balance – adjusted opening balance)
x
Conversion
Adjusted opening balance
The results from step 5 is the NIA
Step 6:
Subtract the results from Step 5 from the conversion amount
Value of conversion ( when conversion occurred) + NIA
The result from step 6 is the market value of the assets that should be recharacterized.

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

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