IRA to Roth Rollover
Bill wants to do a Roth conversion with $25k, but the custodian is backed up and won’t be able to process it before 12/31. Can he do a distribution of $25k from the IRA and deposit it into his Roth and effectively have that count as a Roth Conversion? Am I correct in my thinking that that would qualify as his “one rollover in 12 month” timeframe? Thanks
Permalink Submitted by Alan - IRA critic on Mon, 2021-12-20 16:28
Taxpayers waiting beyond mid December to convert or take RMDs are taking a chance, particularly in today’s service environment. If the custodian can issue a distribution to Bill by year end, Bill has 60 days from the date of receipt of the distribution to complete a 60 day rollover to his Roth IRA. The conversion will be reported on his 2021 tax return (Form 8606), but the 5 year Roth conversion holding period for this conversion will not start until 1/1/2022. Because a conversion does not count under the one rollover limit per 12 months, the 60 day rollover in this case does not limit other such rollovers. Bill could withhold from the distribution (10% is the IRA default rate) if he wants and replace the withheld amount when completing the rollover, or could elect a higher % for withholding. If he does not want withholding to occur, he must specifically decline it when requesting the TIRA distribution.