Conversion to Roth and RMD
Client is 72 and has not taken RMD yet. Client already converted 2/3 of the account to roth in October. He is planning on spending the rest of the IRA in 2021 ie full withdrawal. Because he converted some of his IRA to a Roth before he took his “RMD”, which will be taken by year end, will that cause any problems with the conversion?
Permalink Submitted by Alan - IRA critic on Mon, 2021-11-15 21:18
The RMD is always considered the first distribution in an RMD year. Therefore, client did satisfy the RMD, but the RMD amount was not eligible for rollover. The amount of the RMD must be treated as an excess regular Roth IRA contribution and removed from the Roth as such. To be clear, client does not need to distribute the RMD because he unknowingly already did. This error is not very costly but is a tax reporting mess because the 5498 for the Roth IRA will show a conversion in full, but the RMD amount cannot be treated as a conversion. That portion is reported as a taxable distribution. An explanatory statement will need to be added to his return. The portion of the conversion that exceeded the RMD is valid.