IRA Conversion

Submitted by Robert Hannan on Wed, 2020-12-09 18:19

I’ve heard the CARES Act (COVID-19 legislation) allows unlimited conversion from traditional to a ROTH IRAs during CY 2020. Is this true?

If so:

(1) What would the cost be to me (Fed/State Taxes) to convert approximately $400,000.00 from two traditional IRA accounts to Roth accounts?

(2) How would the conversion be reported t the IRS? My gross income for 2010 was $160,000.

(3) Any mine fields I should be made aware of?

Advice from those the know will be greatly appreciated.

Thank you –

Robert Hannan
Long Beach, CA

Permalink Submitted by Alan - IRA critic on Wed, 2020-12-09 19:44

There was some confusion initially regarding the option of converting a CRD, but since Notice 2020-50 and the design of Form 8915 E, it has become evident that a conversion of a CRD is not allowed. The reason is that the CARES Act requires a “non taxable transfer” between eligible accounts, and a conversion is typically taxable. Accordingly, a CRD TIRA distribution cannot be repaid into a Roth IRA and still be reported as a CRD. It would just be an ordinary conversion, and those are unlimited in number or amount, and of course the taxes must be paid in the current year, not over a 3 year period.
The IRS should have made this more clear all the way back to 2005, when disaster distributions were first provided. It is very likely that several CRD conversions have been executed since April, and there will be mass confusion reporting them since Form 8915 E is not designed to address this. It could well end up that these conversions disqualify CRD reporting, and taxes on the conversion will all be due for 2020.