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#4,151
#4,151
Carp said:
What if you transfer funds from a regular IRA to a ROTH IRA? Since the money hasn't been taxed, will you be required to pay taxes on it before you move it?
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Not before, but it is a taxable event. Most brokers want to withhold 10% of the transferred amount. They will send you a tax document early the following year and you report that amount on your return. That transfer is called a conversion.
It is a conversion from a traditional IRA to a Roth. All or part of your traditional IRA.

Do you have a traditional IRA?
 
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#4,152
#4,152
Carp said:
What if you transfer funds from a regular IRA to a ROTH IRA? Since the money hasn't been taxed, will you be required to pay taxes on it before you move it?
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It gets taxed in the year it's recharacterized. In the first year (about 20-25 years ago) the IRS allowed it to be spread over 4 years. Now I think they just tax whatever is moved to a Roth.
 
#4,153
#4,153
Go aeiou said:
Not before, but it is a taxable event. Most brokers want to withhold 10% of the transferred amount. They will send you a tax document early the following year and you report that amount on your return. That transfer is called a conversion.
It is a conversion from a traditional IRA to a Roth. All or part of your traditional IRA.

Do you have a traditional IRA?
Click to expand...

Would the IRS impose penalties if estimated taxes weren't sent for that year?
 
#4,154
#4,154
Thunder Good-Oil said:
It gets taxed in the year it's recharacterized. In the first year (about 20-25 years ago) the IRS allowed it to be spread over 4 years. Now I think they just tax whatever is moved to a Roth.
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Sorry to be a technical basted, but a recharacterization is if you change your mind, and decide to reverse the conversion from a traditional to a Roth. That is take the funds from the Roth, and put them back in the traditional IRA.

That typically happens when someone sees the tax burden from the original conversion, and they didn't expect it.
 
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#4,155
#4,155
Thunder Good-Oil said:
Would the IRS impose penalties if estimated taxes weren't sent for that year?
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Not unless you under pay your your tax bill. That is the total tax bill. You must have paid 90% of the liability or as much as you paid in the previous year.
Some people pay enough estimated taxes through employment and/or make quarterly payments(typically self employed).

You do not have t have funds withheld for the conversion and most people don't. That way all the conversion amount goes to work in the Roth.
 
#4,156
#4,156
Go aeiou said:
Sorry to be a technical basted, but a recharacterization is if you change your mind, and decide to reverse the conversion from a traditional to a Roth. That is take the funds from the Roth, and put them back in the traditional IRA.

That typically happens when someone sees the tax burden from the original conversion, and they didn't expect it.
Click to expand...

No worries. I'd rather be corrected than leave incorrect information posted. I knew taxation pretty well before Reagan changed everything in 1986. Now I just pay attention when I avoid my own liability. ("Avoiding" and "evading" are separate things kids).
 
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#4,157
#4,157
Go aeiou said:
Not unless you under pay your your tax bill. That is the total tax bill. You must have paid 90% of the liability or as much as you paid in the previous year.
Some people pay enough estimated taxes through employment and/or make quarterly payments(typically self employed).

You do not have t have funds withheld for the conversion and most people don't. That way all the conversion amount goes to work in the Roth.
Click to expand...

So somebody could lose their job in 2020 (and have paid less than the previous year), convert an IRA to a Roth, and get dinged by the IRS. Kind of like making those (legal citizens) that couldn't afford health insurance a few years back pay a penalty.
 
#4,158
#4,158
Thunder Good-Oil said:
So somebody could lose their job in 2020 (and have paid less than the previous year), convert an IRA to a Roth, and get dinged by the IRS. Kind of like making those (legal citizens) that couldn't afford health insurance a few years back pay a penalty.
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You might have paid enough while employed (90% of the total liability for the year). If the work withholding hand been based on a annual income of 120k and you only worked 8 months you would possibly have enough to cover the additional liability of a conversion. You might also drop from a 35 to a 25% marginal rate with the lower income.
You can also make a quarterly tax payment.

Yeah, make health insurance the law. Lots of those penalties were paid.
 
#4,171
#4,171
mr.checkerboards said:
I ended up not selling it. Didnt get up to where I thought it was heading. But thanks to this call I had a nice little 18% increase today.
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If we get good feedback on Disney’s reopening, high TSA #’s for Fri-Sun, and the media doesn’t beat the CV19 death drum all weekend, I believe we open around 18.50-19.25 on Monday.
 
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