Q: I transferred about $80,000 in January from a traditional IRA to a Roth with the same company. It's now worth $15,000 less. Can I undo the transfer and then redo it so I don't have to pay taxes on the $15,000 in lost value?

A: You're in luck: This is one case where the IRS permits a do-over of the conversion so you can lower your tax bill.

When you convert a traditional IRA to a Roth, you normally need to pay income taxes on the full amount of the conversion (except for any non-deductible contributions), even if the account is worth a lot less by the time your tax bill is due. But you can shrink the tax bill by undoing the conversion and starting over again.

The process is called "recharacterization." If you ask the IRA sponsor to recharacterize your conversion and put your money back into a traditional IRA, then you don't need to report the original conversion to the IRS. Then you can convert the traditional IRA to a Roth later and pay taxes on the smaller balance.

The move could save you a lot of money. If you're in the 25% income-tax bracket and you have to pay taxes on the full $80,000 conversion, you'd end up with a $20,000 tax bill -- a hard pill to swallow, considering the account has lost so much money since then. But if you recharacterize and then convert the $65,000 balance to a Roth, your tax bill would shrink to $16,250 -- resulting in a $3,750 tax savings.

You have until six months after the due date of your 2008 return to undo a 2008 Roth conversion (October 15, 2009). But you can't reconvert the account to a Roth immediately. You have to wait until the