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A crucial Roth deadline
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October 11, 2000: 1:15 p.m. ET
Last chance to undo a Roth IRA conversion before Oct. 16 deadline
By Ed Slott
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NEW YORK (CNNfn) - Monday is a big deadline you should mark on your calendar.
Oct. 16 is not only the last day to file your 1999 taxes, it's also the last day to undo, or "recharacterize" your 1999 Roth conversion. And it's the last day you can change back to a traditional IRA if market losses have hit your nest egg.
Here's how it works.
 A Roth recharacerization is when you transfer money you moved into a Roth IRA back into a traditional IRA, as if the original conversion never happened.
Last year, this deadline was pushed back to Dec. 31, 1999 (to recharacterize 1998 Roth IRA conversions), but no such extension has been granted for this year.
This deadline applies whether you have to recharacterize or if you just want to switch it back.
You must recharacterize your 1999 Roth IRA conversion if your 1999 income (Modified Adjusted Gross Income - MAGI) exceeded $100,000 or if you filed "married-separate" for 1999. Filing "married-separate" means each spouse files separate taxes. You cannot convert if you file married separate regardless of your income.
Visit Ed Slott's irahelp.com
If you have to recharacterize, the transfer must be done in a direct trustee-to-trustee transfer from the financial institution holding your Roth IRA to the institution that has your traditional IRA. It can be the same institution, which would make the transfer convenient and easy to execute quickly.
You'll have to transfer all of the money back to the traditional IRA whether it's your original investment or income on the investment.
For example, if you converted $10,000 to your Roth in 1999 and now the account has grown to $12,000, if you recharacterize, all $12,000 (the $10,000 conversion plus the $2,000 of income on the converted funds) must be transferred back to your traditional IRA.
To recharacterize, you must file Form 8606. If you have already filed your 1999 tax return, you'll file Form 8606 with an amended tax return, Form 1040X. If you have not yet filed your 1999 taxes, you will file Form 8606 with your original Form 1040.
Read Ed Slott's columns on the three most important decisions you'll make with your IRA: Choosing a beneficiary, picking a life expectancy and picking a distribution method.
Market losses may inspire a conversion
Many 1999 Roth IRA converters may not have to recharacterize but they may want to recharacterize due to the poor market performance from the time they converted.
For example, let's say in 1999 you converted a $100,000 traditional IRA to a Roth IRA. You would pay federal and state taxes on that $100,000 if you transfer to a Roth. But the market has gone down since then. If the account is now worth $60,000, you wouldn't want to pay taxes on $100,000. So you would recharacterize it into a traditional IRA.
You can recharacterize because of a market downturn even if you have already filed your 1999 tax return through Oct. 16.
I believe many people might not be aware of this important deadline on Monday -- especially people who already filed their 1999 taxes and think there is nothing else can be done. 
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