Traditional IRA rolled into SEP IRA?
Client has two IRA accounts. A large SEP IRA and a much smaller traditional IRA. For simplicity purposes, the client is considering rolling the small balance in the traditional IRA into the larger SEP IRA.
Is this permissible? If so, what are the implications and things to consider?
Permalink Submitted by Alan - IRA critic on Tue, 2023-04-25 18:50
Yes, this is allowable. It is best done by a direct transfer originated with the SEP custodian. This eliminates using up the one allowed 60 day rollover, eliminates tax reporting for both the custodian and the taxpayer, and eliminates the SEP custodian miscoding the amount tranferred as a SEP contribution.
Permalink Submitted by Matthew Ottusch on Tue, 2023-04-25 19:42
If both accounts are held with the same custodian, does it matter how it’s initiated?
Permalink Submitted by Alan - IRA critic on Tue, 2023-04-25 20:05
No, but it should still be done by a same trustee direct transfer to avoid the above 3 issues.