Fidelity Roth conversion
Hi:
I’d like to complete Roth conversions by transfering money between two Fidelity accounts(Fidelity IRA transfer to Fidelity Roth IRA). The online Fidelity transfer function does not allow me to take out any Federal taxes when I complete the online transfer(I do not have the money to pay federal taxes for the conversion outside of Roth conversion). I was told by a Fidelity representative that they could execute the transfer with taking a % of the money transferred for federal taxes but I could not execute this online. I’m concerned that I’m getting misinformation because it would seem like I should have the ability to take out federal taxes with my roth conversion and concerned that the federal taxes would be taken out correctly for the roth conversion. Any thoughts/recommendations about this? I’m concerned I’m missing something since this just doesn’t make any sense to me.
Permalink Submitted by Alan - IRA critic on Tue, 2025-01-14 15:50
You can withhold from the conversion IRA distribution but apparently not online, but the withheld amount will obviously not be converted. For example, if you distribute 50k with 10k withheld, then only 40k is left for conversion, but you will be taxed on the entire 50k, and if you are under 59.5 you would also owe a 10% penalty on the 10k withheld. For these reasons, if you do not have the outside funds to pay the taxes, a conversion is less beneficial.
You could pay quarterly estimates for your 2025 taxes instead, with the first one due 4/15 and the final one due 1/15/2026. You don’t necessarily need to pay the taxes at the time of the conversion.