Roth conversions — split between two years
I transferred money from a tradition IRA to a Roth IRA. Half was transferred in December and the other half in February. Will I have to pay a penalty on my tax return on the amount from December? I’m planning on paying in advance on the latter. This conversion will add over 10% more on my taxes.
Terry Says
Well, I’m not so sure your planning was great. I don’t know what penalty you might pay You will owe taxes on your 2020 return for the conversion you did in 2020, and I assume it went directly into the Roth.
Then you did another separate conversion in 2021 with the remaining portion of your traditional IRA? You will owe taxes on that portion when you file your 2021 return next year at this time.
BUT, and I suspect this might be a possibility, if you moved part into a Roth immediately and let the rest of the money sit in your account (but rolled it within the 60 day window) in February, then I suspect– but don’ know definitively, that the IRS will say the entire amount of the taxes are due when you file your 2020 return soon! It’s about when you TAKE the money out of your traditional IRA, not about when you reinvest it! YOu might seek advice from a tax professional just to be sure.
