Minimizing Tax on Roth Conversion
I have read that tax law allows a person to rollover pretax IRA contributions and earnings into a qualified retirement plan leaving only the non-deductible contribution amounts in the traditional IRA (Section 408(d)(3)(D). If the remaining nondeductible contribution amount was then converted into a Roth IRA would there be any tax implications? Any specifics?
Permalink Submitted by Alan Spross on Mon, 2010-01-25 23:47
That strategy is valid and would work – as long as your current qualified retirement plan would accept an incoming IRA rollover, and also would not limit the acceptance of your IRAs to rollover IRAs that originally came from an employer plan. Not all plans offer to accept IRA rollovers. If you can get the rollover done, the Roth conversion that follows is the easy part, and it WOULD be tax free.
Note that because the rollover to the qualified plan is the tough part, you should do that part BEFORE you do your conversion to the Roth IRA.