Bad answer in today’s Slot Report Mailbag post.
In regard to the second Mailbag question, since the the distribution from the traditional IRA occurred in December 2019, even though the conversion to Roth was not completed until 2020, reporting the conversion on a 2020 Form 8606 would produce a nonsensical result; it’s impossible to report the beginning of this transaction on the tax return for one year and the completion of this transaction on the tax return for the following year. If the distribution isn’t reported at all on the 2019 tax return, that’s sure to trigger a CP2000 from the IRS with respect to the 2019 tax return.
See 26 CFR § 1.408A-4 Q&A 7 which clearly indicates that the taxable amount of the conversion is includible in income on the tax return for the year in which the *distribution* occurs. A distribution in 2019 reported on a 2020 Form 8606 would not produce this result.
Note, however, that the conversion contribution will appear on a 2020 Form 5498, not on a 2019 Form 5498.
Permalink Submitted by Alan - IRA critic on Thu, 2020-03-12 18:24
In addition, for a taxable conversion done in 2020 of a 2019 TIRA distribution, the 5 year holding period for each conversion starts 1/1/2020, not 1/1/2019. Likewise, if this conversion is the first Roth contribution of any type, the 5 year holding period for qualified distributions will also start 1/1/2020. This syncs up with the 5498.
Permalink Submitted by Jerry Doss on Mon, 2020-03-30 15:49
I am 78 years old and have already taken part of my RMD for 2020. Does the act allow me to return these dollars back into my IRA account or roll it over into another of the two IRA accounts I hold.
Permalink Submitted by Alan - IRA critic on Mon, 2020-03-30 18:06
Yes, if you are still within 60 days of receipt of the distribution, and you have not done a 60 day rollover in the past 12 months. If you don’t qualify for either of these reasons, you might still be able to roll it back if you qualify for a “Corona virus related” distribution, You can find more about that on other threads posted here relating to rolling back RMDs taken earlier this year.