IRA Recharacterizations

What is an IRA recharacterization?

An IRA recharacterization allows you to change the type of an IRA contribution after it has been made—typically from a Roth IRA to a Traditional IRA, or vice versa. This can be useful if you later determine that a different IRA type would have provided more favorable tax treatment for the year the contribution was made.

To complete a recharacterization, the original contribution and any related earnings or losses must be transferred between the two IRA types as a trustee-to-trustee transfer. Once processed, the IRS treats the contribution as if it was originally made to the new IRA type for tax purposes.

What are the IRS deadlines for completing a recharacterization?

To be valid, the recharacterization must be completed by the tax filing deadline (typically April 15, or October 15 with an extension) for the year in which the original contribution was made.

If completed by this deadline, the IRS allows you to treat the contribution as if it was made to the second IRA type in the first place.

Can I recharacterize a Roth conversion or rollover?

No. Under the Tax Cuts and Jobs Act of 2017 (Pub. L. No. 115-97), effective January 1, 2018, you cannot recharacterize the following:

• A conversion from a Traditional IRA, SEP IRA, or SIMPLE IRA to a Roth IRA.

• A rollover from a qualified employer retirement plan (such as a 401(k) or 403(b)) to a Roth IRA.
  

Once these types of transactions are completed, they are permanent and cannot be reversed via recharacterization.

How do I request an IRA recharacterization?

• Complete the IRA Distribution Form (for Traditional IRAs) or the Roth IRA Distribution Form (for Roth IRAs).

• Select “Recharacterization” as the reason for the distribution on the form.

• Submit the completed form through the in-app Support Hub by navigating to Menu ➝ Support ➝ Contact Support.

Where can I find more information about recharacterizations?

For complete IRS guidance on this topic, please refer to IRS Publication 590-A, which provides official rules on contributions and recharacterizations.

What is Net Income Attributable (NIA)?

NIA refers to the earnings (or losses) generated by excess IRA contributions while they were in the account. When removing an excess contribution, the IRS generally requires you to also remove the related NIA.

Who calculates the NIA?

Webull does not calculate NIA. You are responsible for determining the correct amount. For assistance, we recommend consulting a licensed tax professional.

Where can I find more information about NIA?

For a detailed breakdown of how NIA works and how to calculate it, please see our Removing Excess Contributions.