ROTH IRA conversion to IRA deadline
Hi, What is the deadline for a ROTH conversion to be considered for “08.
Does the conversion have to be done by 12-31-08 or do they have until April 15th, 09? Thank you, Judy
Hi, What is the deadline for a ROTH conversion to be considered for “08.
Does the conversion have to be done by 12-31-08 or do they have until April 15th, 09? Thank you, Judy
Permalink Submitted by Alan Spross on Wed, 2008-12-10 19:24
The distribution for the conversion needs to be done no later than 12/31/08. But if the conversion is done by rollover rather than direct transfer, there is another 60 days to actually fund the Roth IRA and it would still be a 2008 conversion.
The April date does not apply to conversions as it does for regular contributions.
Permalink Submitted by [email protected] on Wed, 2008-12-10 21:08
does this mean that if a client has an IRA and you ask the company to send them a check prior to 12-31-08, he has 60 days from the date on the check to do a roth-conversion?
ex. receives IRA check on the 20th of Dec, 08, he has until Feb 20th, 09 to do a roth conversion with this amount.
Thanks
Permalink Submitted by Alan Spross on Wed, 2008-12-10 21:21
Right, he has 60 days from the date of receipt of the check to complete the conversion, same as a regular rollover. This period could be used to determine if client really wants to convert or if he qualifies under the income limits. It keeps his options open for conversion, but eliminates the hassle of recharacterization if it turns out he does not qualify.
The caveat here is that client must not have already used up his one rollover from this IRA in the last 12 months to roll it back. If client wanted to roll it back to the TIRA and had used up his one rollover, then he would be forced to complete the conversion and recharacterization in order to get the funds back to the TIRA and avoid a taxable distribution.
Permalink Submitted by [email protected] on Wed, 2008-12-10 21:48
Thank you very much
Permalink Submitted by Al Fry on Thu, 2008-12-11 16:23
Alan – wouldn’t the Roth shell (or an existing Roth) need to be opened pror to 12-31-08?
Permalink Submitted by Alan Spross on Thu, 2008-12-11 19:50
Al, I don’t believe so.
I cannot find any indication in the code or IRS Regs that this is the case. The definition of “qualified rollover contribution” which a Roth converion must meet does not mention any account opening date.
For purposes of the 5 year conversion holding period or taxable year for a conversion, all reporting follows the date of the conversion distribution. As in certain other cases, the year for a 1099R reporting a distribution can differ from the year shown on the 5498 reporting the contribution because these forms follow the date of actual distribution or receipt of funds.