tax on converted distributions
i am under 59.5. i opened a roth in 2011 with contributions. in 2012 and 2013 i converted all my T IRA to Roth. So I’ve meet the 5 year holdling periods. i’ve already distributed all the contributions without tax or penalty. in 2019 i distributed some of the converted amounts. i believe i am looking at the 10% additional tax on the converted assets that were distributed. Is that correct?
Permalink Submitted by Alan - IRA critic on Mon, 2020-02-17 23:26
No. SInce you held the conversions over 5 years, there is no longer any 10% penalty for distributing them before 59.5. However, you do have to report the distribution on Form 8606 just like you did when you distributed the regular contributions, except that you show your conversion basis on line 24 of the 8606 instead of 22.
Permalink Submitted by nick sklenar on Tue, 2020-02-18 00:18
my 8606 has plenty of conversion basis on on line 24 as you noted. i am still seeing a 10% penalty calculating on the 5329 however. is this a software problem or am i missing something else? 8606 line 25c taxable amount = $0, but line 1 and line 3 on the 5329 shows an amount for early distribution.
Permalink Submitted by Alan - IRA critic on Tue, 2020-02-18 00:43
Sounds like the program has not captured the year of your conversions and is treating them as not having met the 5 year conversion holding period. Did you start using this program after the conversions were done? If so, you need to find a way to enter the conversion years. Then the 5329 should disappear. This also assumes that you did not rollover any pre tax qualified plan money to your Roth IRA in the last 5 years since those are treated as conversions.
Permalink Submitted by nick sklenar on Tue, 2020-02-18 00:49
got it thanks. there was a goofy data entry box hidden in the software to tell it not subject to 10 % additional tax. thanks again.