Distribution from Roth conversion before taxed
Jan 2010 : $115,000 TIRA converted to Roth and reported on 8606 as taxable in 2011 and 2012.
Jan 2012 : Entire balance of converted Roth is distributed.
How does distribution impact the 2-year spread? Must 2010 be amended to pay the tax in full?
Permalink Submitted by Alan Spross on Tue, 2012-01-03 19:04
No. The income acceleration provisions for 2010 conversions ended on 12/31/2011.
Distributions of the converted amount will accelerate the income reporting year if taken in 2010 or 2011, but a distribution in 2012 will not change anything. 50% of the conversion income must be reported in 2011 and the other 50% in 2012, so the 2011 return must already include 50% and the rest in 2012 regardless of the distribution.
The 2012 distribution must be reported on an 8606 for 2012, and half the taxable amount will show in line 15b of Form 1040. Note that this distribution will be subject to the 10% penalty unless IRA owner is 59.5 or meets another penalty exception, due to the 5 year holding requirement for conversions.
NOTE: If there are other Roth accounts, the ordering rules apply for non qualified distributions and the other Roth balances would be considered in determining reporting of this distribution. Prior comments assume this conversion is the only Roth IRA owned.