funding a post tax traditonal IRA followed by an immediate conversion
My client’s joint income exceeds the threshhold for direct Roth IRA contributions.
She does not own an IRA consisting of pretax dollars.
Every year since ’08, she has funded an IRA (post tax) and immediately converted it to Roth tax free (except for the pennies of interest she may have accumulated in the interim)
The CPA is concerned that this not permissable and has asked me for evidence that it is.
Please help.
Thanks
Permalink Submitted by mk foss on Wed, 2013-04-03 20:34
There’s been a lot of discussion on the forum about this issue. There is nothing that we can find that says that it cannot be done.Does the CPA have evidence that it is not permissable? The Code and Regulations do not prohibit it.
Permalink Submitted by Jose Morales on Wed, 2013-04-03 23:09
It’s pretty simple, there are no longer MAGI limits for converting a traditional IRA to a ROTH and there is nothing prohibiting a person from opening a Traditional IRA then converting it immediately to a ROTH. The only thing I would want clarified is whether she owns any IRA whatsoever. The comment about “She does not own an IRA consisting of pretax dollars” does not exclude the possibility that she may own an IRA consisting of non-deductible contributions that may have earnings, which would make these conversions partially taxable.