Roth Conversion after Traditional IRA distribution
Hello – I had an individual come to me with some questions about withdrawals they have taken from their traditional IRAs. There were 2 withdrawals, one has already been completed and was deposited into their bank account, the other is still on the way. This person’s original intent was to get the funds back into traditional IRAs but knowing they can only do one 60 day rollover per 12 month period their idea was to take the amount that was already deposited into their bank account and put it into a Roth IRA, essentially as a Roth conversion. Would this be possible, and would it be counted as a 60 day rollover? The second distribution would be handled as a normal 60 day rollover then. I’m am just not sure a company would accept a personal check as a Roth conversion, and if it would then count as a 60 day rollover. Any info would be greatly appreciated.
Permalink Submitted by Alan - IRA critic on Mon, 2025-03-17 12:31
A conversion does not count as a rollover with respect to the one rollover limit. The first distribution could therefore be converted and all or part of the second distribution could still be rolled back. The Roth custodian should be willing to accept a personal check for deposit to the Roth IRA, but the client must tell the custodian that the check is a conversion contribution.
Another option if the client does not want to incur conversion taxes is to make the rollover contribution to a current employer’s qualified plan, if they are employed and the plan accepts IRA rollovers. This rollover is also exempt from the one rollover limit and will avoid the taxes due for a conversion.
Although the IRS frowns on 60 day loans from an IRA, in the future if the client needs funds, they should take just a single distribution plenty large enough to cover their needs. Since there is only one distribution, all or part of it can be rolled back. Two separate distributions trigger the one rollover limitation.