Roth conversion
My individual retirement account consist of Traditional Ira, Rollover Ira and a Roth Ira. If I do a conversion this year do I consider the balance of my traditional and rollover ira’s or just the balance in my traditional Ira? When I do the calculation it makes a difference in the taxable portion to be reported. Thanks
Permalink Submitted by Alan Spross on Tue, 2011-09-13 17:50
You must use the adjusted year end balance of all your traditional, SEP IRA and SIMPLE IRA accounts. A rollover IRA can be either a Roth or traditional, but is usually a traditional IRA. The term “rollover” just means that the IRA was funded by a rollover from an employer plan.
If you have basis in your TIRA per Form 8606, doing an employer plan rollover will usually dilute the basis % making the taxable share of distributions or conversions higher.
If you follow the Inst for Form 8606, the form will calculate the taxable amount for your conversions.
NOTE: Taxpayers that have a significant after tax balance in their IRAs may want to consider rolling the pre tax amount into their current employer plan if the plan will accept rollovers. This leaves behind only the non deductible contributions in the TIRA, and the this remaining IRA balance can be converted tax free.