RMD’s and Roth Conversions
I have a 71 yr old client with approx $15k in an IRA that we just converted. His RMD for 2010 is approx $600 (as stated by the fund company).
Will the Roth Conversion count towards the RMD? If not, what is the recommended course of action to take the RMD appropriately?
Permalink Submitted by Marvin Rotenberg on Fri, 2010-02-05 18:38
A RMD must come out first and then the remaining amount can be converted to a Roth IRA. If the conversion occurred in 2009 there was no RMD required to be taken so the entire amount could have been converted. In 2009 you still had the $100,000 limit in effect.
Marvin
Permalink Submitted by Alan Spross on Fri, 2010-02-05 22:32
But if the conversion was done in 2010 prior to taking the RMD, that means that the 2010 RMD was converted to a Roth IRA. Since an RMD is not eligible for rollover to a Roth or any other tax deferred account, you would have to treat the RMD amount as a failed conversion. To correct that, you treat the RMD amount as a regular Roth excess contribution and ask to have it returned with allocated earnings.
There is no tax on the return of the excess contribution because the tax was paid on the conversion itself, but any earnings would be subject to tax, but no penalty since taxpayer is obviously over 59.5.