Timing of Roth IRA conversion
Although we are already well into 2009, I find that for my 2008 tax year I was eligible to convert a substantial amount from my simple IRA into a Roth IRA with minimal tax impact. Is it possible to still make that conversion before the due date (including extensions) of my 2008 tax return? Or must the conversion have been made in calendar year 2008? Also, what if I have already filed my 2008 tax return? Can I make the conversion now and file an amended return before the final due date (including extensions)?
Permalink Submitted by tomd37 on Sat, 2009-08-01 17:46
The last date for IRA conversion was December 31, 2008.
Permalink Submitted by Perry Samuels on Mon, 2009-08-03 13:53
Thanks. So I take it the timing of conversion contributions differs from the timing of other contributions——conversion contributions must be made within the tax year while other contributions can be made up to the filing due date (excluding extensions) for the tax year?
Permalink Submitted by tomd37 on Mon, 2009-08-03 14:57
Your understanding now is correct.
Permalink Submitted by Alan Spross on Mon, 2009-08-03 18:23
To clarify further – the TIRA distribution must be made by year end (12/31), but the actual Roth conversion does not have to be made for 60 days if done by indirect rollover. Most conversions are done by direct transfer, but many are also still done by indirect rollover. If the distribution is taken on 12/31, and the Roth contribution is made in February of the following year, it is still taxed as a prior year conversion, ie. the year of distribution. However, in these circumstances the Roth aging rules state that the year of the actual Roth contribution begins the 5 year holding period for this particular conversion. If this conversion is your first Roth contribution of any type, the year of the conversion contribution also determines when the clock starts for the 5 year holding requirement for later distributions to be qualified.
In summary, you could have a 2008 conversion reported and taxable in 2008, but if the Roth contribution is made in 2009, then 2009 is the first year of any 5 year holding period that applies.