@fanfare wrote:
I take back my original answer.
The problem is that there is a problem because the converted amount is a distribution and that is considered RMD until the RMD is satisfied, and you can't put RMD into a Roth. Catch-22.
You can report your error but you do not have to pay any penalty up front.
you treat the converted amount as Roth contribution. If it is an excess, you can resolve it next year by using your allowed IRA contribution as an offset.
This is really arcane and as I said before in other threads, who's going to know this?
@Opus 17
@Jack-A-Lope
[note added: per @dmertz below, this is not technically correct, but the paperwork will look correct and might not raise any red flags.]
As I mentioned, any withdrawal must first go to the RMD. However, there is only one 1099-R form and the transactions are not reported by date. If the taxpayer in my example converted $20,000 in April and withdrew $5000 in December, the 1099-R will show a $25,000 distribution. If the RMD is $4000, then Turbotax will determine that $21,000 was eligible for conversion. (You check the box that "part of the withdrawal is an RMD", Turbotax will do the calculation and determine how much of the withdrawal is eligible for conversion.). As long as the conversion was less than the eligible amount, it won't show up as an error.
