Rollover and Roth Conversion in the same year
Hello,
I have a client who had a rollover check going into their SEP IRA in March 2019 and then did a Roth conversion in April. Clients CPA is telling them you are not allowed to have a rollover and a Roth conversion in the same year, I’ve never heard of this before, can you confirm if this true? Thank you.
Permalink Submitted by Alan - IRA critic on Mon, 2019-06-24 18:24
For purposes of the one rollover limit per 12 months, a conversion is not counted. Code reference Sec 408A( e),(1), (B)(ii). CPA is incorrect.
Permalink Submitted by David Mertz on Mon, 2019-06-24 18:55
Rather than thinking that the Roth conversion would not be allowed, the CPA might be concerned about the effect of a rollover to a traditional IRA from a qualified plan in the same year that the individual does a Roth conversion of other IRA funds and the individual has basis in nondeductible traditional IRA contributions. Under those circumstances, the rollover from the qualified retirement plan would likely increase the taxable amount of the Roth conversion, perhaps substantially, with the difference being basis that remains in the individual’s traditional IRAs to be applied to subsequent traditional IRA distributions. But as Alan_iracritic said, there is no limitation on the ability to do a Roth conversion that would be triggered by doing a rollover. A permissible rollover followed by a Roth conversion is perfectly legal.