Problem with TIRA to Roth IRA
What to do about $2.54 that was deposited on 12-31-2010 into a TIRA that was converted to a Roth on 12-23-2010. On 1-3-2011 this $2.54 was converted to the Roth. Problem: No RMD was taken for 2011 and there is no balance in the TIRA available. The conversion of the $2.54 was done by the Trustee without consulting the owner of the IRA.
Should the whole amount now in the Roth be recharacterized? This would defeat the purpose for the conversion in 2010.
Permalink Submitted by Alan Spross on Thu, 2011-03-03 03:56
Apparently, IRA custodians handle these situations differently. Sounds like this was money market interest from December or something similar. I know in this situation, Fidelity does nothing, they just let the pennies sit in the TIRA waiting for a request to deal with it.
This does not affect the 2010 conversion whatsoever, and you could make a good case for just ignoring it, other than the fact that there will be a 2.54 taxable conversion for 2011.
If you wanted to pursue a proper correction, you would figure your RMD for 2011 based on the 2.54 year end balance of the TIRA. That would probably result in an RMD of between .10 and .20. You would then treat that amount as an excess regular contribution to the Roth IRA and ask that it be distributed to you with allocated earnings. You are still looking at less than .25 here. All this rounds down to -0-, which makes the case to simply ignore it other than reporting the small conversion on your 2011 return.
Again, this has no effect on the 2010 conversion or the 2010 tax return. If that conversion income is being deferred to 2011 and 2012, this just means that you will add 3.00 to the 2011 conversion amount deferred from 2010.