self employed SEPP converison to Roth
self employed with out employees is eligible to make a $50k contribution to a brand new SEP. Is it correct that there is no such thing as Roth SEP? if no Roth SEP available, is it allowed and what are the disadvantages of making a contribution to the SEP and immediately rolling it to a TIRA, then immediately converting it to a Roth IRA. It seems that while the SEP can be funded as late as 4/15 on behalf of the prior year, if the tax payer wishes for the ultimate coversion to Roth to be tax neutral, the funding of the SEP should take place in the year it’s on behalf of, and the rollover over to the TIRA and subsequent conversion to the Roth should take place before 12/31 of that same year. Am i missing anything to ultimately accomiplish a tax neutral deposit into a Roth IRA?
Permalink Submitted by Alan - IRA critic on Fri, 2021-04-23 14:37
A SEP IRA is traditional only. If the taxpayer wishes they can convert from the SEP IRA to a Roth IRA anytime. There is no reason to run converted amounts through a TIRA account, which is an unneeded exercise. Most self employed participants will not know their max SEP IRA contribution until their tax return for the prior year is completed and therefore most SEP contributions are made for the prior year. However, if they wish to fund the Roth ASAP they might make a small SEP contribution for the current year, small enough so that there is no risk of making an excess SEP contribution that would carry into the Roth account.