- Mark as New
- Bookmark
- Subscribe
- Subscribe to RSS Feed
- Permalink
- Report Inappropriate Content
Retirement tax questions
Anstoss,
Any distribution from a traditional IRA to a Roth IRA is taxable. The code 2 says that you won't be dinged with a 10% additional penalty beyond the regular income tax you would pay if you were under 59 1/2 years old at the time. IRS publication 590-B (https://www.irs.gov/pub/irs-pdf/p590b.pdf) discusses the exceptions to such an early distribution on pages 22-24.
It is possible you thought that you were not making a taxable transaction when you did the conversion. In that case, it is unfortunate, but, as noted in IRS publication 590-A (https://www.irs.gov/pub/irs-pdf/p590a.pdf:(
"No recharacterizations of conversions made in 2018
or later. A conversion of a traditional IRA to a Roth IRA,
and a rollover from any other eligible retirement plan to a
Roth IRA, made after December 31, 2017, cannot be recharacterized as having been made to a traditional IRA."
You are stuck paying the tax, but not the penalty. If that extra tax proves to be more than you can afford right now, you should pay as much as you can with the tax return and either pay the balance within 120 days after April 15 or set up a payment plan at https://www.irs.gov/payments/online-payment-agreement-application or with paper form 9465. You should also handle your state tax return, if any, similarly.