How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Wendy Reed Your Own Question

Wendy Reed
Wendy Reed, Enrolled Agent
Category: Tax
Satisfied Customers: 3346
Experience:  15+ years tax preparation and tax advice.
753989
Type Your Tax Question Here...
Wendy Reed is online now
A new question is answered every 9 seconds

I had a Roth Conversion in 2008. I paid the State and Federal

Resolved Question:

I had a Roth Conversion in 2008. I paid the State and Federal income taxes from my Traditional IRA account. I miscalculated and my AGI was over $100 K because the tax payments from my IRA was considered distribution (I am over 59-1/2, so no early withdrawal penalty.) Realizing this in April 2009, I recharacterized a portion of my Roth IRA back into my traditional IRA. When I called my Broker, they said that my State taxes were already paid in 2008, and I will have to claim it as a refund in 2009. Now, in 2010, as I fill my 2009 return, I must declare the $4,050 as income, and pay either 15% or 25% Federal Income Taxes on a Roth Conversion that was recharacterized (I received no benefit, and when I do another Roth Conversion, I will pay income taxes twice). Is there some mechanism that I can avoid claiming the $4,050 as income for 2009?
Submitted: 4 years ago.
Category: Tax
Expert:  Wendy Reed replied 4 years ago.

Thank you for giving me the opportunity to assist you. I will give the best answer that I can with the information provided.

 

Hello there Lin-Nay,

Did you recharacterize the portion of the Roth by the due date of the 2008 return?

What statement did you get for 2009 that you are saying is taxable now?

Customer: replied 4 years ago.
Form 1099-G from the State of California. Yes, I recharacterize a portion of the Roth IRA before Apr. 15, 2009.
Expert:  Wendy Reed replied 4 years ago.

Customer, the state tax refund and its status as taxable doesn't have anything to do with your Roth recharacterization. Apparently, if you recharacterized the portion of the Roth before the due date, then you should not have paid taxes on that portion---because it is treated as never having been converted.

 

When an individual deducts state income tax in one year (2008) on his federal return, and then receives a refund of that tax, the refund is taxable as a recovery, up to the amount that it allowed the taxpayer to receive a tax benefit the prior year. You are not paying tax on this twice. Many people think that, but it is not the case.

 

For example, If your standard deduction for the federal government in 2008 was $10,000, and your itemized deductions were 15,000, then your itemized deductions were $5000 greater than the standard. Then, when you receive a portion of what you deducted back (the state income tax that you took a deduction for in 2008), you have to claim it as income up to the amount that it gave you a tax benefit.

 

I know it is confusing, but it is your state tax refund that is taxable to the federal government, not your Roth recharacterization.

Wendy Reed, Enrolled Agent
Category: Tax
Satisfied Customers: 3346
Experience: 15+ years tax preparation and tax advice.
Wendy Reed and 7 other Tax Specialists are ready to help you

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
< Last | Next >
  • http://ww2.justanswer.com/uploads/KU/KUMI95/2013-9-30_195031_kumar.64x64.jpg Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
  • http://ww2.justanswer.com/uploads/CU/Cuttinggirl/2011-10-29_03719_wcrop2.64x64.jpg Wendy Reed's Avatar

    Wendy Reed

    Enrolled Agent

    Satisfied Customers:

    3052
    15+ years tax preparation and tax advice.
  • http://ww2.justanswer.com/uploads/CATax/2009-08-04_204548_Mark.jpg Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    985
    MBA, EA, Specializing in Business and Individual Tax Returns and Issues
  • http://ww2.justanswer.com/uploads/IN/insearchoftheanswer/2013-8-16_0233_attorney.64x64.jpg Richard's Avatar

    Richard

    Tax Attorney

    Satisfied Customers:

    3229
    29 years of experience as a tax, real estate, and business attorney.
  • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    6121
    Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JG/jgordosea/2012-6-7_43138_GordosVeritas.64x64.jpg jgordosea's Avatar

    jgordosea

    Enrolled Agent

    Satisfied Customers:

    2783
    I've prepared all types of taxes since 1987.
  • http://ww2.justanswer.com/uploads/OZ/ozaukeecpa/2012-6-7_193219_Picture1croppedandshrunk.64x64.jpg MequonCPA's Avatar

    MequonCPA

    Certified Public Accountant (CPA)

    Satisfied Customers:

    2231
    CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.