IRA Roth Conversion w/ Simple IRA

Submitted by Andy Reynolds on Wed, 2018-03-21 14:35

Person A started a Simple IRA in 2018 and plans to max it out.

Person A, also is making Non-Deductible contributions to a Trad. IRA in 2018.

Person A is considering a conversion of the non-deductible Trad. IRA contributions at the end of 2018 depending on taxes for the calendar year.

1) I am aware of the prorata rule on the taxation of the Trad. IRA conversion. However, does the 2 year Simple IRA rule come into affect in regards to the conversion of the Trad. IRA money?

2) Also, can Person A convert the Simple IRA to a Roth IRA after the 2 year period has passed?

Thank you.



Submitted by Alan - IRA critic on Wed, 2018-03-21 15:17

  1. No, the SIMPLE IRA balance is included in the determination of the conversion tax, as it must be listed on line 6 of Form 8606. The two year waiting period does not affect this.
  2. Yes, the SIMPLE can be converted to a Roth IRA after the 2 year waiting period. If this person would convert the pre tax SIMPLE IRA anyway, there is no reason not to convert the non deductible contribution first since the taxable amount on the conversion of the non deductible TIRA contribution would be offset by a reduction in the taxable amount when converting the SIMPLE IRA. In other words, the basis that is not used for the first conversion would be applied to the second conversion. Of course, the conversions may be in different years.

Add new comment

Log in or register to post comments