My late wife had a small retirement account and that was rolled over into a Rollover IRA that is now in my name.
I have already taken out the MRD for this year.
Can I transfer any funds from the Rollover IRA into my Roth IRA?
If yes, and if I know I’m in a position of getting a tax refund for this year when I file, do I have to pay any tax now on the amount transferred?
Hi TerryMcK,
“Can I transfer any funds from the Rollover IRA into my Roth IRA?”
Since the RMD has been satisfied, you can convert some/all of the remaining balance to a Roth IRA.
“If yes, and if I know I’m in a position of getting a tax refund for this year when I file, do I have to pay any tax now on the amount transferred?”
I did the quarterly filings via the Treasuries EFTPS.gov system to submit payments.
The IRS likes to have the withholding completed by:
January 1 – March 31 April 15
April 1 – May 31 June 15
June 1 – August 31 September 15
September 1 – December 31 January 15* of the following year. *See January
payment in Chapter 2 of Publication 505, Tax Withholding
and Estimated Tax
I setup all my payments when I “know” them in EFTPS. When the date rolls around, the system grabs the cash from my checking account. No writings checks, filling out paper forms, forgetting to get it in the mail on time, …
I print a copy of the submission for my tax filing.
Does that help you?
Gene
All holdings and some statistics on my Fool profile page
http://my.fool.com/profile/gdett2/info.aspx
If the taxes due on your Roth conversion are less than your refund, no additional payment is required. If tax due is much larger you need to make arrangements. Filing estimated taxes at the end of the quarter is one way. Or you can increase deductions to cover it if you are taking deductions.
I have already taken out the MRD for this year.
Can I transfer any funds from the Rollover IRA into my Roth IRA?
As already mentioned, yes, since the RMD has been satisfied, you are allowed to convert any or all of the remaining balance in that IRA. Except - if you have other Traditional IRAs in your name, you are also required to also take the RMDs out of those accounts before doing any conversions. So, if you have, say, monthly or quarterly payments taken out of another IRA, you will need to wait until the final payment on that IRA is done for the year to do any conversions from this IRA.
If yes, and if I know I’m in a position of getting a tax refund for this year when I file, do I have to pay any tax now on the amount transferred?
No. If, even after the conversion, you will get a refund, you will have met 2 of the safe harbors:
If you would be due a refund without doing the conversion, but by doing the conversion you would potentially owe taxes, the other safe harbor that you can meet is to ensure your payments to the IRS exceed your tax liability for the prior year (110% of that liability if your AGI is over $150k). And I will point out that another way to make a payment, in addition to the EFTPS that Gene pointed out is to use withholding from an IRA to pay the IRS. That can be done any time during the year, and it will be considered by the IRS to be evenly withheld throughout the year.
I will also point out that you should consider that the income from the conversion can affect:
Additionally, if what you’re trying to do is to simplify your accounts, you can combine this IRA with any other Traditional IRAs in your name, without doing a conversion.
AJ
Thanks to all