Roth IRA conversion timing

[SumDay]

I've searched prior threads, looked on Investopedi, Google, and the IRS website, and am now totally confused.

Do Roth conversions have to be done by 12/31, or is it 60 days after IRA withdrawal (regardless of when the tax year falls), or is it April 15?

Thanks. This is my maiden Roth conversion voyage and I'm a little seasick.

 

[kaneohe]

I've searched prior threads, looked on Investopedi, Google, and the IRS website, and am now totally confused.

Do Roth conversions have to be done by 12/31, or is it 60 days after IRA withdrawal (regardless of when the tax year falls), or is it April 15?

Thanks. This is my maiden Roth conversion voyage and I'm a little seasick.

They have to be done by 12/31 if you want it counted/reported on that yrs taxes. They have to be done within 60 days of IRA withdrawal if you want it counted at all.

 

[kgtest]

The date the conversion happens is the year you report it on taxes. As opposed to contributions being able to be made BY April 15th for a Prior year's tax return.

The sooner you convert the sooner it starts to grow tax free...why wait?

 

[kaneohe]

https://www.irs.gov/retirement-plan...regarding-iras-rollovers-and-roth-conversions

"How do I convert my traditional IRA to a Roth IRA?
You can convert your traditional IRA to a Roth IRA by:

Rollover – You receive a distribution from a traditional IRA and contribute it to a Roth IRA within 60 days after the distribution (the distribution check is payable to you);

Trustee-to-trustee transfer – You tell the financial institution holding your traditional IRA assets to transfer an amount directly to the trustee of your Roth IRA at a different financial institution (the distributing trustee may achieve this by issuing you a check payable to the new trustee);

Same trustee transfer – If your traditional and Roth IRAs are maintained at the same financial institution, you can tell the trustee to transfer an amount from your traditional IRA to your Roth IRA."

interesting that the 60day limit is only discussed in the 1st option above
(check issued to you). If the second option (trustee-to-trustee transfer)
is chosen.........does this mean if you are issued a check payable to the new trustee, this means?? that you have until forever to complete the conversion........no reason why you would do that but if you misplaced it/forgot it??

 

[SecondCor521]

The date the conversion happens is the year you report it on taxes.

New entrant to this thread. I know the above. However, I don't know if a conversion happens on the date of distribution from the traditional or the date of the rollover into the Roth.

Personally I've always just done an immediate transfer from my traditional to my Roth since they're with the same custodian. And I get it done before the last few days of the year so there's no question.

But if someone distributes from their traditional on, say, 12/24/19, and rolls it over to their Roth on 1/4/20, which year did the conversion happen in?

 

[Sunset]

^^^^
I think it conversion is on the date it is put into the ROTH.
After all if you don't put it in, there is no conversion, plus the money could have actually been spent on a new car, then some borrowed money was used to deposit into the ROTH. So there is not actual connection between the withdrawal and deposit of the money.

 

[Alan]

^^^^
I think it conversion is on the date it is put into the ROTH.
After all if you don't put it in, there is no conversion, plus the money could have actually been spent on a new car, then some borrowed money was used to deposit into the ROTH. So there is not actual connection between the withdrawal and deposit of the money.

When you complete IRS form 8606 reporting the conversion, it asks for the value of all non-Roth IRA's on December 31st, so if the 1099-R shows the IRA has not had the money deducted, then the rollover has not happened by the end of the year, otherwise the following year's 8606 would be messed up.

Not sure if what I said makes sense...

 

[zinger1457]

When you complete IRS form 8606 reporting the conversion, it asks for the value of all non-Roth IRA's on December 31st, so if the 1099-R shows the IRA has not had the money deducted, then the rollover has not happened by the end of the year, otherwise the following year's 8606 would be messed up.

If the distribution from the IRA was made prior to 12/31 the 1099-R should indicate a taxable distribution on that date. The IRA doesn't know if you intend to spend that money or roll that distribution into a ROTH within 60 days.

 

[kaneohe]

When you complete IRS form 8606 reporting the conversion, it asks for the value of all non-Roth IRA's on December 31st, so if the 1099-R shows the IRA has not had the money deducted, then the rollover has not happened by the end of the year, otherwise the following year's 8606 would be messed up.

Not sure if what I said makes sense...

Alan.........the part of about Dec. 31 is in Pt I which you only fill out if you made a non-deductible contribution for the yr or you took a distribution from an IRA that contained non-deductible contributions. If neither applied you would start w/ pt II which does not ask that Dec 31 question.

Also even if you fill out pt I, if you are doing an indirect rollover,the withdrawal
from the IRA could have occurred w/o the conversion being completed.

 

[CRLLS]

New entrant to this thread. I know the above. However, I don't know if a conversion happens on the date of distribution from the traditional or the date of the rollover into the Roth.

Personally I've always just done an immediate transfer from my traditional to my Roth since they're with the same custodian. And I get it done before the last few days of the year so there's no question.

But if someone distributes from their traditional on, say, 12/24/19, and rolls it over to their Roth on 1/4/20, which year did the conversion happen in?

In a "Rollover" transaction (see post #4), it would logically be the date that the check issued in your name, is deposited into the Roth Account. Consider that you could have a distribution made from the IRA and keep some or all of that money. How would the IRS know you intended to do that? The simple answer is that they don't. So it only makes sense that the date of conversion is officially the deposit date. Any date before that would be pure speculation. End of year statements on the 2 accounts would not balance out. That's how I would expect it to happen.

 

[SecondCor521]

In a "Rollover" transaction (see post #4), it would logically be the date that the check issued in your name, is deposited into the Roth Account. Consider that you could have a distribution made from the IRA and keep some or all of that money. How would the IRS know you intended to do that? The simple answer is that they don't. So it only makes sense that the date of conversion is officially the deposit date. Any date before that would be pure speculation. End of year statements on the 2 accounts would not balance out. That's how I would expect it to happen.

Yeah. But logic and how the IRS works are not always the same thing.

 

[bingybear]

If you have your roth and TIRA at the same investment house, just do it the easy way... just have the brokerage move the assets you want to convert from your TIRA to your Roth. The conversion is done, the paperwork comes later.

 

[Fleur58]

I'm waiting to convert until Monday Dec 30. By that date I will have received my first and only paycheck of 2019, and all Dividends and Cap gains have been put into my accounts. I'll then know how much I will be able to convert in my 12% tax bracket.

 

[Alan]

Alan.........the part of about Dec. 31 is in Pt I which you only fill out if you made a non-deductible contribution for the yr or you took a distribution from an IRA that contained non-deductible contributions. If neither applied you would start w/ pt II which does not ask that Dec 31 question.

Also even if you fill out pt I, if you are doing an indirect rollover,the withdrawal
from the IRA could have occurred w/o the conversion being completed.

I haven’t made a non deductible contribution for 10 years but have to fill out part I every year I do a Roth conversion because when I rolled over my 401k to an IRA it contained some after tax contributions which means with every conversion the form is needed to calculate how much of the conversion is tax free and how much the new basis is, to be carried forward.

 

[Alan]

In a "Rollover" transaction (see post #4), it would logically be the date that the check issued in your name, is deposited into the Roth Account. Consider that you could have a distribution made from the IRA and keep some or all of that money. How would the IRS know you intended to do that? The simple answer is that they don't. So it only makes sense that the date of conversion is officially the deposit date. Any date before that would be pure speculation. End of year statements on the 2 accounts would not balance out. That's how I would expect it to happen.

Yeah. But logic and how the IRS works are not always the same thing.

If the taxpayer is over age 59.5 then the tax paid is the same regardless of what happens to the money. (Under age 59.5 would trigger an early withdrawal penalty if it wasn’t rolled into a Roth I think). Not sure what checks, if any, the IRS makes for those under age 59.5 to be sure that the money arrives into a Roth. If the 1099 shows the money leaving the IRA before Dec 31 then that is the year the tax is due.