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New Member
posted Nov 23, 2021 12:19:27 PM

What will my tax liability be for 2021if I withdraw from my IRA and deposit to my Roth IRA?

I'm retired and wonder what my tax liability will be if I make an IRA withdrawal and put the resulting amount in my Roth IRA?

0 8 956
8 Replies
Level 15
Nov 23, 2021 12:25:22 PM

The same as if you didn't roll it over to a ROTH.  It will add to your income and be taxed at your tax rate and may push you into a higher tax bracket and can make more of any Social Security taxable.

Level 15
Nov 23, 2021 3:14:13 PM

In lieu of a distribution then an indirect conversion  you should have the transaction done via trustee to trustee direct conversion ... this will make sure you don't accidentally miss the conversion deadline.  Also remember you do not need to convert the entire account balance in one tax year ... you can split it up to possibly save on the tax hit. 

Level 15
Nov 23, 2021 7:37:52 PM

You can’t contribute new money to a Roth IRA unless you have compensation from working.  

You can do a rollover from a traditional IRA to a Roth IRA.  The tax would be the same as if you withdrew the money.  

Level 15
Nov 24, 2021 4:22:21 AM

Moving money from an IRA to a ROTH is called a conversion (not a roll over or contribution) and it taxable just like a regular distribution would be however there would be no penalty if you are under the age of 59.5.  

Level 15
Nov 24, 2021 7:39:24 AM

@Critter-3 

It’s still technically a rollover, just a special type of rollover also called a conversion.  (See, for example, page 4 of the 1099-R instructions.  Just a nitpick.)

Level 15
Nov 24, 2021 8:00:25 AM


@Opus 17 wrote:

@Critter-3 

It’s still technically a rollover, just a special type of rollover also called a conversion.  (See, for example, page 4 of the 1099-R instructions.  Just a nitpick.)


The IRS pub 590A calls it a "conversion contribution"

 

Converting From Any Traditional IRA Into a Roth IRA

[quote]

Allowable conversions.

You can withdraw all or part of the assets from a traditional IRA and reinvest them (within 60 days) in a Roth IRA. The amount that you withdraw and timely contribute (convert) to the Roth IRA is called a conversion contribution.

 

And the 5498 form reports rollovers in box 2 and conversions in box 3.

 

Box 3. Roth IRA Conversion Amount

Enter the amount converted from a traditional IRA, SEP IRA, or SIMPLE IRA to a Roth IRA during 2021. Do not include a rollover from one Roth IRA to another Roth IRA, or a qualified rollover contribution under section 408A(e) from an eligible retirement plan (other than an IRA) to a Roth IRA. These rollovers are reported in box 2.

 

So they seem to define a "rollover conversion" from a retirement plan "other than a IRA" which they call a conversion.

 

So It is probably correct to refer to it either way.

Level 15
Nov 24, 2021 8:41:11 AM

I said it was a nitpick.  A conversion is sub-type or special type of rollover. 

Level 15
Nov 24, 2021 1:43:05 PM

It was a nitpik however since many users get easily confused in the program I only posted the answer so that no one would accidentally try to enter the 1099-R distribution in the IRA Contribution section as so many do.  There are new contributions, rollover contributions and conversion contributions and one needs to keep all three separate and not mix them up.