When moving money from one type of IRA to another, you can choose to make a recharacterization or a Roth conversion.
Recharacterization
If you made a deposit to one type of IRA but decided that you would rather have the deposit in a different type of IRA, you can recharacterize the deposit so long as this is done before the tax filing deadline. For example, if you made a Traditional IRA contribution to Wealthsimple this tax year, you can recharacterize it to a Roth IRA contribution if done by the tax filing deadline. With recharacterizations, you are changing the IRA type for the initial contribution you made so it doesn't affect your taxable income for the year. Read more on IRA recharacterizations
Conversion to Roth IRA
If you wish to convert traditional IRA contributions you made in previous tax years, or you wish to make a backdoor conversion to your Roth IRA, you can perform a Traditional to Roth conversion. A conversion is a distribution from your Traditional IRA that you're adding to your Roth IRA. Since you're moving funds between IRAs, conversions don't incur the 10% early distribution penalty and don't use contribution room for the year. However, the distribution of pre-tax funds from your Traditional IRA may increase the taxable income you need to report in the year you make the conversion. Read more on Roth Conversions
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