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bobngu
Level 2

IRA to Roth IRA conversion, withdraw $20K and withhold $4K for federal tax. Is taxable amt $20K or $16K?

 
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Accepted Solutions
JohnW15
Intuit Alumni

IRA to Roth IRA conversion, withdraw $20K and withhold $4K for federal tax. Is taxable amt $20K or $16K?

The taxable amount is $20,000.

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5 Replies
JohnW15
Intuit Alumni

IRA to Roth IRA conversion, withdraw $20K and withhold $4K for federal tax. Is taxable amt $20K or $16K?

The taxable amount is $20,000.

bobngu
Level 2

IRA to Roth IRA conversion, withdraw $20K and withhold $4K for federal tax. Is taxable amt $20K or $16K?

So I am getting double taxed?
JohnW15
Intuit Alumni

IRA to Roth IRA conversion, withdraw $20K and withhold $4K for federal tax. Is taxable amt $20K or $16K?

No, you'll be taxed on the $20,000, and the $4,000 you had withheld on that distribution will be used to pay your taxes on the distribution.
dmertz
Level 15

IRA to Roth IRA conversion, withdraw $20K and withhold $4K for federal tax. Is taxable amt $20K or $16K?

If you are under age 59½, the amount not converted to Roth ($4,000) is also subject to an early-distribution penalty.

Roth conversions are most beneficial if you can pay the taxes with funds from another source since you end up with more in the Roth IRA to grow tax free.
bobngu
Level 2

IRA to Roth IRA conversion, withdraw $20K and withhold $4K for federal tax. Is taxable amt $20K or $16K?

Good point, I definitely don't want to incur the early-distribution penalty.
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