Can Tax Withholding for Roth Conversion also be the RMD?
Our advisor’s client did a large Roth Conversion earlier in 2022 and is paying the conversion tax from the IRA itself. 20% was withheld. The wirehouse rep says that withholding serves as the 2022 RMD. Does that withholding count as a prior distribution to the remaining 80% can be converted to a Roth? Thanks. PGM
Permalink Submitted by Alan - IRA critic on Tue, 2022-12-06 16:32
Yes. The withholding can be applied against the RMD. Perhaps that is why 20% was selected, as the default withholding rate is only 10%. However, if the RMD is larger than the withholding, and the RMD was not completed with any prior or other account distributions, a part of the conversion will be an excess contribution that will have to be corrected.