Golfers love a mulligan after a bad shot, but so do investors. You have a chance at a do-over courtesy the IRS. Here is a great article from SmartMoney magazine for those folks that converted a Traditional IRA to a Roth IRA. With the fall in the stock market, you may be able to save some taxes by reversing that conversion if your account is smaller now than when you converted. The process is called “recharacterization” and is explained well in the article. The deadline for this is October 17 so you need to hurry.
Keep in mind, if you converted to Roth in 2010, the IRS gave you an option to declare the income from the conversion over two years - ½ in 2011 and ½ in 2012. If you undo the 2010 Roth Conversion, you will lose this option. If you later reconvert into a Roth you will not be able to spread the income over two years and will have to declare all the income in the year of conversion.
The article says you need to wait 30 days after recharacterization before you reconvert to a Roth IRA. Keep in mind you can’t convert and reconvert in the same tax year. Someone made a comment on the article that is incorrect about this. Neither the article nor the comment is exactly correct. I urge you to read the IRS language for yourself on page 30 of IRS Publication 590 and consult a local tax CPA if you want to do this.