CARES Act and Roth Conversion

Submitted by Steven Williams on Fri, 2020-04-03 12:16

What if I take a qualified CVD in November and realize I don’t need it come December, can I convert to a Roth since I’m still within the 60-day window under standard rules? Or will the qualified CVD coding on my 1099 prevent this?



Submitted by Alan - IRA critic on Fri, 2020-04-03 16:05

  • We don’t know yet how the IRS will decide to track this, but since the natural disaster distribution model is already in place from past natural disasters, it appears that Form 8915 B or similar will be filed by the taxpayer, and used to enforce the 100k limit, whether taxes are paid in one or 3 years, penalty waiver, amounts repaid, etc
  • Therefore, I think that if you do not claim any portion of your TIRA distribution as a CVD, you should be able to convert it and not report it as part of your 100k limit since it will not be a CVD. 
  • Note that a Roth IRA is not included in the list of eligible retirement plans for CVD rollovers, and that is why it is important to not have your conversion reported from a CVD distribution. Unless the IRS changes it, the TIRA custodian will not code any distribution as a CVD on Form 1099R. The taxpayer self reports all this on Form 8915B. Of course, that means that you cannot pay the conversion taxes over 3 years, but that may be one of the reasons that Roth IRAs were not shown as eligible retirement plans for rollbacks (they were for prior natural disaster distributions). The main purpose of the legislation is to free up retirement funds to pay needed expenses, not for taxpayers to do strategic conversions because their income is down and they do not have to take RMDs.

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