2008 IRA Distribution into 2009 Roth Conversion
Is there a time limit for rolling over a traditional IRA distribution to a Roth IRA? I have a client who took a 12/29/08 taxable IRA distribution from his traditional IRA. Must he do the Roth conversion within the first 60 days of 2009 or does he have all of 2009 to do the Roth conversion?
Permalink Submitted by Anonymous (not verified) on Sat, 2009-02-21 20:52
He has 60 days to either deposit the funds in a Roth IRA as a conversion. If he cannot handle the taxes that will be due, then he could roll the funds back to the TIRA as long as he still has his one rollover available. He could also split the rollover with part going to the Roth and the rest back to the TIRA. As you know time is getting short to act on the 12/29/08 distribution. Of course, even if he makes the wrong decision in converting, he can still recharacterize the conversion.
The Roth conversion will be taxable and reportable in 2008 and he must qualify using 2008 income, although the 5 year holding requirement to avoid the early withdrawal penalty on distributions of Roth conversions will start in 2009, not 2008.
Permalink Submitted by Janine Janine on Wed, 2009-02-25 22:38
[quote=”Alan S.”]He has 60 days to either deposit the funds in a Roth IRA as a conversion. If he cannot handle the taxes that will be due, then he could roll the funds back to the TIRA as long as he still has his one rollover available. He could also split the rollover with part going to the Roth and the rest back to the TIRA. As you know time is getting short to act on the 12/29/08 distribution. Of course, even if he makes the wrong decision in converting, he can still recharacterize the conversion.
The Roth conversion will be taxable and reportable in 2008 and he must qualify using 2008 income, although the 5 year holding requirement to avoid the early withdrawal penalty on distributions of Roth conversions will start in 2009, not 2008.[/quote]
I am assuming that we are not talking about a RMD distribution, correct? RMD distributions cannot be deposited in a Roth IRA as a conversion, correct?
Permalink Submitted by Alan Spross on Wed, 2009-02-25 22:47
Correct. If he is subject to RMDs in 2008, he must take out the RMD prior to converting, or some of that conversion would be an excess regular IRA contribution.