ROTH IRA from SEP-IRA
After converting a SEP-IRA to a ROTH IRA, the money put into it by the employer will be taxed and payment due at the end of the year. Is that correct?
After converting a SEP-IRA to a ROTH IRA, the money put into it by the employer will be taxed and payment due at the end of the year. Is that correct?
Permalink Submitted by Marvin Rotenberg on Tue, 2010-01-19 17:35
An employer can not contribute to a Roth IRA. The contribution you are referring to must go into a SEP IRA. If the first SEP IRA was converted to a Roth IRA and closed a new SEP would have to be established to accept the employer contribution. If however, there is another SEP IRA open it can be used to accept the contribution.
Marvin
Permalink Submitted by Alan Spross on Tue, 2010-01-19 18:32
If scooper was just asking about the tax on the Roth conversion, note that for 2010 Roth conversions, the income is not reported until 2011 and 2012 unless taxpayer opts to report it all in 2010. If this was a 2009 conversion, taxes will be due by 4/15/2010. While the SEP IRA is fully pre tax, Form 8606 will apply any basis you have in any other traditional, SEP or SIMPLE IRA resulting in part of the conversion being tax free. Follow the instructions for Form 8606 to report the conversion.