2012 Roth Conversion

Submitted by Carla Ann Goedtke on Tue, 2013-02-12 14:46

Client (age 47) did a full Roth conversion 12/22/2012 of their IRA. Pershing withheld 10% federal taxes (fine print – if no amount is selected they withhold 10%). The client did not want federal taxes withheld from the conversion, can a check be sent into the account under the 60-day rule? Are there any other year-end ramifications?
Thank you



Submitted by Alan - IRA critic on Tue, 2013-02-12 16:16

  • Yes, the client can replace the 10% withheld with a personal check deposited to their Roth IRA as a conversion contribution. This must be done within 60 days of the receipt of the original conversion. This will be reported as a full Roth conversion on client’s 2012 tax return.
  • What is somewhat strange here is if the client were to recharacterize this, there are two conversions to recharacterize because the rollovers were deposited on different dates. And for purposes of the 5 year holding period for Roth conversions, the 5 years starts 1/1/2012 for the 12/22/12 90%, but 1/1/2013 for the final 10%. This does not change the fact that for taxation purposes the total conversion is reported on the 2012 return on Form 8606.

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