Deferred Initial RMD vs Roth Conversion
I will turn 72 in 2022 and realize that my first RMD can be delayed until early 2023. I am also aware that the first money withdrawn from a retirement account, during a year in which a distribution is required, should be the RMD.
Question: If I elect to defer the 2022 RMD until 2023, am I allowed to perform Roth conversions during 2022?
Thank you for all you do.
Michael
Permalink Submitted by Alan - IRA critic on Sun, 2021-10-03 13:39
Unfortuneately, since 2022 is an RMD distribution year for you, you cannot do a conversion in 2022 before you completed your 2022 RMD, and the same goes for 2023. So this is the last year in which you can convert without the added income from your RMD. If you were to convert in 2022 before your 2022 RMD, since a conversion is a distribution plus rollover, the amount converted would actually be treated as your 2022 RMD, but then an excess Roth contribution up to the amount of your RMD or your converted amount, whichever is less. You would then have to remove those funds from your Roth IRA to avoid continued 6% excise taxes.
Actually, since the IRS does not get reports for the dates of your distributions, just the distribution amount, they would not know of this infraction if you processed both the conversion and the RMD in 2022. However, if you converted the entire distribution, the IRS would see your conversion on Form 5498 and on your tax return Form 8606, and would not receive a 1099R for any additional amount that would have been your RMD. IRA custodian usually enforce these timing issues when they can, but due to the RMD aggregation rules you might have met your RMD from another IRA that the custodian of the TIRA from which you convert is not aware. That compromises the ability of your custodian to warn you about the RMD and conversion timing restrictions. These requirements are further complicated when QCDs are included in the mix.