Roth IRA Conversion (taxes witheld)
Happy New Year!
T-IRA account owner, < 59.5 converted to a Roth IRA late December 2014
She mistakenly requested the custodian to withhold taxes on the “back door” Roth conversion
The custodian has since stated they will not make the correct as it’s too late
Questions
What if any options does the account owner have in reading to the tax withholding?
Can she rollover the amount of the withholding since it’s within 60 days?
Will she be subject to a 10% penalty on the amount of the tax withholding?
Thank you
Permalink Submitted by Alan - IRA critic on Mon, 2015-01-12 21:00
Yes, she can complete the rollover using her other funds within 60 days of receipt of the original distribution. That will eliminate the penalty on the withheld amount because the rollover is then completed, and it will be reported as a full 2014 conversion on her taxes. She then claims credit for the withholding on that return against her total 2014 tax bill. In other words, in the end the withholding sent to the IRS is treated as if she paid it to the IRS. The amount of the 1099R is treated as if it ALL went into the Roth, but she still claims credit for the withholding.