@pathfinder1298 wrote:
It is my understanding the CARES Act not only suspended the Required Minimum Distribution From IRAs but also allowed tax payers over the age of 70 1/2 to use funds from a Traditional IRA to convert to a Roth IRA.
I understand that I will have to pay taxes on said Traditional IRA but TT is indicating that I can't convert the funds because I did not receive wages equal to the transfer and the I would be penalized until I correct this issue.
Please advise!
The CARES Act is immaterial. There has never been a age restriction for a *conversion*. That has nothing to do with a *contribution* - totally different things.
A conversion is simply taking a taxable Traditional distribution and having the trustee of the account move to to a Roth IRA. That is subject to the normal Traditional IRA distribution tax.
The SRCURE Act (not CARES Act) removed the age restriction for new Traditional IRA *contributions* that still must come from taxable compensation as defined by the IRS.
(Taxable compensation is generally wages that you worked for - W-2 or net self-employed income minus the deductible part of the SE tax, but can include commissions, certain alimony and separate maintenance, and nontaxable combat pay ).
See IRS Pub 590A "What is compensation" for details:
https://www.irs.gov/publications/p590a#en_US_2020_publink1000230355
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
