replace ROTH conversion withholding in 60 days

Submitted by Nathan biteth on Wed, 2018-02-21 02:43

Hi,

I screwed up by not rejecting tax withholding when I did ROTH conversion earlier this year. My current understanding is that any tax withholding is considered early distribution (basically less money converted to ROTH) and will be subject to 10% penalty. Please correct me if I am wrong about it.

I plan to put withholding back within 60 days to avoid penalty, my questions are related to it :

1. Should I put money back to my previous “converted from” IRA (but it’s already been closed by broker since the whole account has been converted) or to my newly converted ROTH account ?

2. How should I report this replacement in next year’s tax return ?

3. I do have other ROTH/IRA accounts not part of this conversion, can I put money back into those accounts instead to offset withholding (early distribution) ?

Thanks in advance.
Nathan



Submitted by Alan - IRA critic on Wed, 2018-02-21 16:15

  1. Just make a rollover contribution to the Roth IRA equal to the withheld amount. 
  2. You can then report the full amount of the conversion on your Form 8606 for 2018 and remember to show the withholding on your return to get credit for it against your total tax bill. If you want to recover the money sooner you could reduce other withholding or quarterly estimates. You can make the rollover contribution to any Roth account you choose, but it will be easier to track your conversion if you contribute it to the same account. 

 

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