Simple IRA conversion to Roth-Use existing Roth?
Taxpayer can take his Simple IRA (older than 2 years) from a previous employer and convert it to a Roth IRA. It is a relatively small amount, and he also has an existing Roth IRA with a small amount. Rather than setting up a second Roth IRA, would transferring the Simple IRA to the existing Roth IRA be considered a conversion and, therefore, be permitted?
Permalink Submitted by Alan Spross on Fri, 2010-01-15 19:34
Yes, this is permitted, and if the amount of the conversion is small enough it is probably not worth the hassle of setting up a separate Roth for it. The only caveat is that if client decides to recharacterize, the earnings calculation will be based on the entire Roth account, not just the amount converted. Based on the difference between the earnings on the original portion and the earnings on the converted assets, the dollar amount to be recharacterized can be higher or lower than the amount that would apply to a separate Roth account conversion.
Permalink Submitted by [email protected] on Fri, 2010-01-15 20:47
Thanks Alan.