Roth conversion of after tax contributions in rollover IRA
Husband and wife (over 65) have been taking annual RMD’s from their individual roll over IRA’s . Each has an approx $4000 basis in their roll over account. They also each have a Roth. Can they remove the basis amount and put it in their individual roth accounts? What is the procedure.
Thanks
Permalink Submitted by Alan - IRA critic on Wed, 2021-10-20 17:41
Roth conversions pro rate the basis of each spouse as documented on their individual 8606 forms. Pro rating means each conversion will contain a % of basis and that % would not be taxable. So if their adjusted year end balance is 100,000, then any amount converted will be 96% taxable. The basis cannot be separated unless it is possible to roll the pre tax IRA balance into an accepting employer plan (if they are employed), as that would allow them to convert the basis tax free. Note that the BIden tax plan will eliminate the conversion of any after tax amounts starting in 2022, so if they are going to convert after 2021, the entire conversion will be taxable.