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If a taxpayer ( who's already past 70 1/2), decides in early 2019 to convert his entire traditional IRA balance to a ROTH ( before 31 Dec 2019), does he still have to take an RMD for 2019 before the conversion?
Thanks
JND
Solved! Go to Solution.
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RMD is not eligible for conversion to a Roth.
The first dollars taken from an IRA after you reach age 70-½ are deemed by the IRS as going toward the RMD. Therefore, you must distribute the RMD before any amount of your IRA is converted to a Roth. Failure to do so could result in an excess contribution to a Roth IRA. The IRS levies a 6% penalty for each year this money remains in the Roth IRA.
The pro-rata rule applies to RMDs in the same way it is used for Roth conversions. For example, an IRA owner has an account worth $100,000, of which $15,000 is after-tax contributions. The owner is over 70-½ and has to take a $3,000 RMD before converting $20,000 to a Roth. 15% of the RMD ($450) is considered after-tax and 15% of the Roth conversion ($3,000) is after-tax.
https://rodgers-associates.com/blog/are-roth-conversions-right-for-people-over/
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Thank you for this! I was following since I didn't know the answer. I dont think Ive ever seen a roth conversion by someone over 70½ so I never had reason to research it....now I get to add another tidbit of info into my mental rolodex!
♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
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Thank you so much! Not surprised that RMD still required since the tax impact is the same ( both become taxable income), but lost sight of the " excess contribution" issue to the Roth and the 6% excise.
Intend to followup with taxpayer as to whether the fiduciary advised about the RMD after getting instruction to convert the entire Traditional. Seems like the 1099R does not call out a separate RMD when they did the total conversion.