I converted $5500 from traditional IRA to ROTH IRA. Is converted amount counted as ROTH IRA contribution in the same year?

[Hal_Al · Accepted solution]

No.

You may make a normal Roth contribution in addition any conversions you make in the same year, regardless of the amount of the conversion.

Conversions and contribution are two different things. Conversions do not count as contributions for the $5500 ($6500 for age 50+) contribution limit*. 

*But, any contributions you made to a traditional IRA (TIRA) contribution, in the same, year,  whether deductible or non deductible, do count toward that $5500 limit.

[bobbi2v]

If the conversion (from my tradional IRA to ROTH) doesn't count as contribution, then why does Vanguard show my limit of 6500 when I try to make this conversion?  

[bobbi2v]

I'm not contributing to the traditional IRA at all...FYI

[Hal_Al]

You need to get an explanation from Vanguard

[bobbi2v]

i did get that explanation from them..they say a conversion counts as a contribution, so not sure who's right or wrong on this one

[mesquitebean]

bobbi2v:
Is there anything more to your story that you haven't described?  e..g, are you age 70 and 1/2 or older and required to take an RMD each year?

[bobbi2v]

Sorry Hal_Al but i'm pretty sure you are wrong about this.  I read the IRS regs carefully and it seems that the conversion amount is considered part of your contribution.  I wish you were right...oh well

[bobbi2v]

I am over 70 and taking the RMD but I thought you could take additional distribution as conversion after the RMD reqt was met.

[mesquitebean]

We don't know what all you've done; that's why I asked.  All those things are important to know, so I'm trying to gather info that may help someone assist you.    So you took the RMD separately first, then later did a conversion?  You didn't try to do it all in one step, right?

I'm not a tax person, but @Hal_Al or @dmertz  should be able to assist you sometime today when they are next in the forum.

[dmertz]

With regard to a Roth IRA, only a *regular* contribution is subject to the $6,500 annual limit.  A conversion to a Roth IRA involves a *conversion* contribution, *not* a regular contribution.  If Vanguard is indicating that you are not eligible to make the contribution due to already having made $6,500 in *regular* contributions to a Roth IRA, they are mistakenly processing the conversion contribution as a regular contribution.  Make sure that you (or they) are using the correct Vanguard form for a Roth conversion so that Vanguard does not try to treat it as a regular contribution.  The form to use if your traditional IRA is also at Vanguard:  <a rel="nofollow" target="_blank" href="https://personal.vanguard.com/pdf/s254.pdf">https://personal.vanguard.com/pdf/s254.pdf</a>

Are both accounts at Vanguard?

Is it an account rep that is telling you that you can't do the conversion?  If so, escalate to a supervisor.

If the traditional IRA was at a different financial institution, Vanguard doesn't seem to have a form to indicate an indirect conversion contribution.  Perhaps they want you to roll it over to a Vanguard traditional IRA first and then do an in-house Roth conversion using the form above.  However, it's perfectly legal to take a distribution from a traditional IRA at one financial institution and make a conversion contribution to a Roth IRA at another.

[bobbi2v]

Thanks so much for this advice.  I haven't made any contribution to Roth yet but have fulfilled the RMD.  So I will look at the form you linked and then I'll ask them why the auto conversion form is forcing this limit.  You've been so helpful..thank you

[mdaycock]

I am having this issue as well.  Turbo is saying the conversion is an excessive contribution.  In order for the conversion not to be treated as a contribution, how should the 1099-R be reported?

[bobbi2v]

I'm surprised this is still an active thread as I filed so long ago.  But this is the winning answer for sure.  I did exactly as suggested and found the right form at Vanguard so it was a conversion.  I expect this method to work fine.  Thanks so much for all the good, and detailed, advice.  I'm referring to dmertz advice in particular but thanks to all.