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Author: activeREinvestor Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: IRA conversion? Date: 5/23/2004 9:41 AM
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I have a SEP IRA. I would like a Roth IRA.

I am told that I can not convert a SEP to a Roth. I was also told (different person) that if I convert the SEP to a traditional IRA first I can get to a Roth. Anyone with any experience with this?

Side question that I know I can look up but if I have your attention...

What are the income levels for converting an IRA to a Roth?

John

PS. I know I need to deal with the tax on the conversion to a Roth
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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 71929 of 121061
Subject: Re: IRA conversion? Date: 5/23/2004 10:29 AM
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I have a SEP IRA. I would like a Roth IRA.

I am told that I can not convert a SEP to a Roth. I was also told (different person) that if I convert the SEP to a traditional IRA first I can get to a Roth. Anyone with any experience with this?


Both of your sources are wrong. The contents of a SEP-IRA can be converted into a Roth IRA. A SEP-IRA already is a traditional IRA except that it is established under a simplified employee pension plan (SEP) so that it can receive employer contributions as well as employee contributions.

Side question that I know I can look up but if I have your attention...

What are the income levels for converting an IRA to a Roth?


Your modified AGI must be under $100K in the year of conversion. See IRS Pub. 590, Individual Retirement Arrangements (IRAs), for all of the details. www.irs.gov/pub/irs-pdf/p590.pdf

PS. I know I need to deal with the tax on the conversion to a Roth

Correct. The amount converted will be taxed as ordinary income to the extent that you do not have any basis in your existing IRA.

Ira


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Author: activeREinvestor Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 71936 of 121061
Subject: Re: IRA conversion? Date: 5/23/2004 5:04 PM
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Thanks for the reply.

Interesting on the conversion. I had a conversion refused because it was a SEP. Charles Schwab was the company. Maybe they just made a mistake.

John


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Author: activeREinvestor Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 74391 of 121061
Subject: Re: IRA conversion? Date: 12/3/2004 4:56 AM
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Interesting on the conversion. I had a conversion refused because it was a SEP. Charles Schwab was the company. Maybe they just made a mistake.


I was also told that you can not go directly from a SEP to a Roth. As you can get there with the middle step of a traditional IRA it really does not matter what is the truth vs. what the company says. You can get there so the choice is yours.

John

PS. I need to verify if I can I can convert my IRA to a Roth if my wife exceeds the limits. Is there a way to file such that I can get the conversion done. Hopefully the IRS publications will be clear on the point.

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 74409 of 121061
Subject: Re: IRA conversion? Date: 12/3/2004 8:02 AM
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I was also told that you can not go directly from a SEP to a Roth. As you can get there with the middle step of a traditional IRA it really does not matter what is the truth vs. what the company says. You can get there so the choice is yours.

And IRS Pub. 590 clearly states that you can convert a traditional, SEP or SIMPLE IRA to a Roth IRA (under certain circumstances).

PS. I need to verify if I can I can convert my IRA to a Roth if my wife exceeds the limits. Is there a way to file such that I can get the conversion done. Hopefully the IRS publications will be clear on the point.

Not sure what you are looking for. Your ability to convert an IRA to a Roth IRA depends on your modified AGI being less than $100K and your filing your tax return with any status EXCEPT "married filing separate". So, if your wife's income puts you jointly above the $100K maximum, there is no way to alter your filing status to allow a conversion.

Ira


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Author: activeREinvestor Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 74430 of 121061
Subject: Re: IRA conversion? Date: 12/3/2004 3:08 PM
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Ira,

Thanks for the note.

I had read the pdf pointed to by the link and worked out for myself that we earn too much for what I want to do. Good to hear that I had not read things incorrectly.

John

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