Zona
Recycles dryer sheets
- Joined
- Apr 26, 2013
- Messages
- 213
In 2011, DH made a $5000 contribution to his traditional IRA on the advice of our then-accountant. We later received a CP11 saying he overcontributed by $4000 so we then paid the taxes on that portion and reported it on form 8606 in 2011. In later years he made only pre-tax contributions to that traditional IRA, so that $4000 is the only post-tax contribution in any of his traditional IRA accounts (he has two traditional IRA accounts, one Roth IRA account, and a SEP IRA).
This year we would like to partially convert that IRA to a Roth IRA (and planning on doing more Roth conversions in future years). But I'm reading that we have to use a pro-rata basis to split out this measly $4000 contribution against *all* the dollars in *all* of his traditional IRA assets (including the SEP IRA?) for *every* Roth conversion or future distribution. It seems like a lot of work for such a small amount.
We anticipate that this particular traditional IRA account can be fully Roth converted within two or three years; it has the smallest balance of all his IRA accounts. My question is, are we *required* to do this correctly by the IRS, or can we just treat all IRA assets as pre-tax and go ahead and pay the tax on the full amount as we do Roth conversions out of this account? We realize we will be paying double-tax on that $4000 but we anticipate doing Roth conversions for the next 20 years or so (DH is 51 and his SEP IRA is much larger and will require many years to convert to Roth) and would love to avoid a tracking/pro-rata nightmare each time we do a Roth conversion.
Thanks in advance for any insight you can provide.
This year we would like to partially convert that IRA to a Roth IRA (and planning on doing more Roth conversions in future years). But I'm reading that we have to use a pro-rata basis to split out this measly $4000 contribution against *all* the dollars in *all* of his traditional IRA assets (including the SEP IRA?) for *every* Roth conversion or future distribution. It seems like a lot of work for such a small amount.
We anticipate that this particular traditional IRA account can be fully Roth converted within two or three years; it has the smallest balance of all his IRA accounts. My question is, are we *required* to do this correctly by the IRS, or can we just treat all IRA assets as pre-tax and go ahead and pay the tax on the full amount as we do Roth conversions out of this account? We realize we will be paying double-tax on that $4000 but we anticipate doing Roth conversions for the next 20 years or so (DH is 51 and his SEP IRA is much larger and will require many years to convert to Roth) and would love to avoid a tracking/pro-rata nightmare each time we do a Roth conversion.
Thanks in advance for any insight you can provide.