Roth Conversion from SEP IRA
I have a client who owns a Prudential Annuity SEP IRA. The customer wishes to start converting his free withdrawal amount to a Roth Conversion account. Currently he has opened a Roth conversion brokerage account. Prudential will not process a trustee to trustee transfer of the funds. They will only send him a check for the free withdrawal amount. Our plan is to request the free withdrawal check and have to customer deposit this check into his checking account. Then, the customer will turn around and write a new check to his Conversion account. Is there any problem with the transaction?
Permalink Submitted by Alan - IRA critic on Tue, 2025-10-07 10:14
No problem, but when making the Roth contribution client should be sure to tell the custodian that it is a conversion contribution so they will code it correctly on Form 5498. He should also be aware that the SEP distribution is subject to 10% withholding unless he declines withholding or wants a higher rate. If there is withholding taken, he can replace it with other cash to complete the conversion.
He should be sure that there are no excess SEP contributions in the SEP IRA that would be converted. This is more likely for the self employed due to an incorrect calculation of self employment income.