dmertz
Level 15

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Because of the first-out rule for RMDs, the distribution that you made from the traditional when you did the Roth conversion included your RMD, or at least part of it, and depositing that portion into the Roth IRA was not permitted and that portion is a failed conversion.  It therefore constitutes a regular contribution to the Roth IRA, not a conversion contribution, and is an excess contribution to the extent that it exceeds what you are eligible to contribute to a Roth IRA as a regular contribution.

 

Assuming that you cannot treat it (or a portion of it) as a regular contribution, or you do not want to do so, the proper remedy is to obtain an explicit return of contribution from the Roth IRA.  The distribution must be accompanied by any attributable investment gain or loss.  Any investment gain will be taxable as ordinary income on your 2022 tax return.  Whether you treat the failed conversion as a permissible regular contribution or as an excess contribution, you need to inform the Roth IRA custodian so that they treat the amount of the failed conversion as a regular contribution.

 

The non-legal alternative is to ignore the issue and just take another distribution from the traditional IRA equal to the amount of your RMD for 2022.  Because the IRS doesn't receive information regarding the dates of the transactions, the IRS is unlikely to detect the failed Roth conversion.  If they ever do, though, you'll likely have an excess contribution penalty for each year the failed conversion remained in the account and was not able to be applies as a regular Roth IRA contribution.