roth conversion

Roth Conversions and Required Minimum Distributions: Today’s Slott Report Mailbag

QUESTION: Hello Mr. Slott, I have been doing Roth conversions this year from two small accounts (one a rollover IRA, the other a SEP-IRA) to consolidate into fewer accounts. The small SEP-IRA has been drained this year (2022) by converting the balance to my Roth. The rollover IRA was reduced by one third this year, and the rest should be converted to the Roth in early 2023.

Random Real-Life Questions and Answers

Each day we receive dozens of retirement-related questions from advisor members of the Ed Slott Elite IRA Advisor Group. Conversations range from incredibly complex to obscure to, “I just need you to confirm what I was thinking.” Whether a long explanation is required or a quick comment, our members have our undivided attention. We take every question seriously and proactively fill in any information gaps. Here is a random sampling of some recent communications:

IRA Rules That We Give Thanks for in 2022

It is a Thanksgiving tradition here at the Slott Report to take a moment to give thanks for the IRA rules that are helpful to retirement savers. We know there are many times the rules governing retirement accounts can be tricky. They often seem illogical, confusing, and may be even unfair. However, there are others that work well and give us the tools we need to save for a secure retirement – and may be even get a few tax breaks along the way.

NUA – Trigger Activators!

The goal of the net unrealized appreciation (NUA) tax strategy is to enable a person to pay taxes on the appreciation of company stock formerly in a work plan at long term capital gain rates as opposed to ordinary income rates. The spread between long term capital gains vs. ordinary income could result in a sizable tax savings for those eligible for the strategy. However, not everyone can participate, and for those who are candidates for NUA, there are potential stumbling blocks along the way.

IRA Transactions That Can Be Missed

Not every IRA transaction is easily identifiable. Some require a little legwork to reveal or report what occurred. Some transactions are not even labeled on official IRS tax forms and can go undetected. Here are three items that taxpayers and tax professionals alike can easily miss.

The Las Vegas Conference

The Ed Slott team hosted a highly successful training program for members of our Elite and Master Elite Advisor groups last week in Las Vegas. Over 300 financial advisors from across the country attended. Feedback on the educational material provided was positive, with one attendee saying he “never felt more empowered” in his 18-year career.

The Clock is Ticking on 2022 Conversions

Fall is in full swing now with football, foliage, and pumpkin spice everything. The holiday season is just around the corner. Before we know it, the year 2022 will come to an end. If you are considering converting an IRA to a Roth IRA in 2022, the clock is ticking. Here is what you need to know when making this decision:

ROTH CONVERSIONS AND INHERITED IRA RMDS: TODAY’S SLOTT REPORT MAILBAG

Question: Late in December, 2021, a taxpayer (under age 59 ½) takes a distribution of his (traditional, not Roth) 401(k), and has 20% withheld for Federal tax. Early in January, 2022, the full 100% of the distribution is deposited in a Roth IRA. Does this avoid the 10% penalty for early distribution? Is this reportable as a Roth conversion in 2022 or 2021?

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