Simple IRA 60 day conversion to Roth
Can I do an indirect conversion from a Simple IRA to a Roth IRA? So, withdraw from the Simple, check made out to me, then send the money to a Roth IRA. I’ve found reference online to that being an issue with some retirement plans so am double checking. The custodian wants the Simple to be rolled to an IRA first, then do the conversion, and we are running short on time to do that in 2020.
Also, any issue with the withdrawal occurring in December, but the deposit to the Roth occurring in January? Thank you!
Permalink Submitted by Alan - IRA critic on Tue, 2020-12-15 14:34
As long as you have met the 2 year holding period from the date of your first SIMPLE contribution, you can either transfer or do a 60 day rollover to your Roth IRA. It is not necessary to run the distribution through your TIRA to convert. You have 60 days to complete the rollover, even if that bridges the end of the year. One minor issue of bridging year end is that your conversion 5 year holding period does not start until 2021, the year the conversion contribution is made. That means your holding period lasts a year longer than if you made the conversion contribution this month. You would still report the distribution and conversion rollover on your 2020 tax return however, even if the conversion contribution is made in 2021. The IRS should be used to the Form 5498 reporting the conversion contribution being issued 16 months after the distribution 1099R instead of 4 months, but it is possible they will still ask you to provide documentation of the rollover date. This conversion does NOT count against the one rollover per 12 month limitation.