Roth Conversion with Tax Withheld

HL1 — Tue, 04 Jun 2019 19:10:05 GMT

Did a Roth Conversion from Traditional IRA with 10% tax withheld, received 1099R the gross distribution and taxable amount shows the conversion amount of $2000, tax withheld of $200. The actual deposit to Roth account was $1800. When enter this information in TT. Need some clarification on the TT interview questions. Which answer would apply:

Yes, added $200 to the $1800 got (total of $2000)
No, didn't add $200 to the $1800 got

If you used the funds from the conversion to pay the taxe...

TomD8 — Tue, 04 Jun 2019 19:10:06 GMT

If you used the funds from the conversion to pay the taxes, then you didn't "add the $200." In effect, you converted $1800 and took out $200 to pay the tax. That's why the actual deposit to your Roth was only $1800.

If you had converted the entire $2,000 and paid the $200 tax bill with outside funds, that would be "adding" the $200.

If you're under 59 1/2, you'll incur the 10% withdrawal penalty on the $200 you didn't convert.

This is a good example of why it's better to avoid using the funds from a Roth conversion to pay the tax on the conversion.

topic Roth Conversion with Tax Withheld in Retirement tax questions

Roth Conversion with Tax Withheld

If you used the funds from the conversion to pay the taxe...