Roth IRA Tax Withholding

Submitted by james clemensen on Sun, 2022-08-14 21:28

If an age 72+ Individual does a $100,000 Roth IRA conversion, of which 20% ($20,000) was withheld for taxes; can the $20,000 count towards the RMD because it didn’t truly end up in the Roth IRA as a Roth IRA conversion?

It may be smarter to do $80,000 Roth IRA conversions with no withholding paired with a $20,000 distribution with 100% tax withholding



Submitted by Dan Zaehring on Sun, 2022-08-14 22:53

There are a number of issues here, particularly around the RMD for the year,  but the withholding cannot be used as RMD because the full RMD must be taken BEFORE the conversion can be made. Was the full RMD previously taken?

Submitted by Alan - IRA critic on Sun, 2022-08-14 23:27

  • Let’s assume this is the only owned TIRA account and this is the first distribution of the year. The distribution is for 100k, of which 80k was rolled over as a conversion. What is done with the 20k is immaterial and since it is not being rolled over, it would be applied toward the RMD. If the RMD was greater than 20k, then the RMD amount in excess of 20k was converted and becomes an excess regular Roth IRA contribution which must be removed from the Roth IRA as such. 
  • The amount of the RMD was not stated. If the RMD was actually 20k, it would be preferable to eliminate the gray area of simultaneous transactions by first taking a 20k distribution with 100% withheld (although many brokerages cap WH % at 99), then do the 80k conversion the next day.

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