2009 Conversion
For a Roth conversion to be counted for 2009 does the conversion need to take place before the end of the year, or can it extend to April 15th?
For a Roth conversion to be counted for 2009 does the conversion need to take place before the end of the year, or can it extend to April 15th?
Permalink Submitted by Alan Spross on Sat, 2009-12-19 01:30
The distribution must be done no later than 12/31/09, however for an indirect conversion the taxpayer has 60 days to roll it over to a Roth IRA. In that situation, the latest possible date for a 2009 conversion to be completed is 3/1/10, the 60th day after a 12/31/09 distribution. The MAGI income limit of 100,000 would apply.
The conversion would still be reportable and taxable in 2009, however the 5 year holding period for that conversion would begin in 2010, not 2009. If this was the first Roth contribution of any type, the 5 year holding period for earnings to be qualified would also start in 2010. This is true for conversions, but not regular contributions. A regular contribution for 2009 made in April, 2010 will still be considered a 2009 contribution for starting the 5 year clock.
Permalink Submitted by [email protected] on Sat, 2009-12-19 01:51
Alan-
Could you please explain what you mean by indirect conversion. Thank you.
Permalink Submitted by Alan Spross on Sat, 2009-12-19 02:28
Conversion by indirect rollover means that the taxpayer receives a check from the traditional IRA and then has 60 days to roll it over to a Roth IRA, or for that matter to another traditional IRA. By using a direct rollover there is no check made out to the taxpayer and the funds move by electronic transfer to the Roth IRA. This is completed on the same day or perhaps the next day. The transfer can be to a Roth with the same custodian or do a different IRA custodian.