Roth IRA conversion without earned income
Can I convert my traditional IRA to my roth IRA account if I do not have any earned income ? I am 65 and retired. Thanks
Can I convert my traditional IRA to my roth IRA account if I do not have any earned income ? I am 65 and retired. Thanks
Permalink Submitted by Alan Spross on Fri, 2011-04-01 21:09
Yes, there is no earned income requirement for a Roth conversion, just for regular Roth contributions.
Note that you can convert a portion of your IRA to help control the tax bill. A large conversion will inflate your marginal tax bracket and you might end up paying more in current taxes than the conversion will save you later on.
Permalink Submitted by Yungti Yin on Fri, 2011-04-01 21:23
Thanks. A follwo up question. I know I have to pay taxes if I convert my Traditional IRA to my Roth IRA. but in my case, some of my traditional IRA was before tax contribution, some are after tax contribution, but I do not have all the figures anymore(that was long time ago), How do I figure out the tax amount if I do the conversion ? Thanks.
Permalink Submitted by Alan Spross on Fri, 2011-04-01 21:48
You probably will have to spend some time to reconstruct the amount of non deductible contributions you made. It is not easy if you do not have good records. First you need to know which years you made contributions at all, and then check your tax returns to see if you deducted them or not. If you find that you did not deduct them (non deductible contributions), you should have filed Form 8606 to document your non deductible contributions with the IRS. You can still file these forms retroactively starting with the oldest year (as far back as 1987) and working forward until you get a current total on the most recent 8606.
This total determines how much of your conversion will not be taxed as a % of your IRA value. You also use Form 8606 to report your conversion and it does the calculations to determine the taxable amount.
If you do not go through all of that, the IRS will assume that all your contributions were deducted and you will have to pay taxes on the full amount of your conversion.
Sometimes your tax person has records to help you, but if so your 8606 forms would be up to date. All your IRA custodian can tell you is whether you made a contribution or not. They do not know whether you deducted it or not. As a final resort, you can request copies of old tax returns or Forms 5498 from the IRS.
Permalink Submitted by Yungti Yin on Sat, 2011-04-02 00:18
OK, Thanks a lot. I’ll do the best I can. at least I should be able to find some of the papers if not all.