"I thought all IRA accounts stood alone if they were set up that way. I have IRA accounts for different years, in different financial institutions, in different types of investments. Is Phil saying that I have to take ALL my IRA accounts into account when converting just one year's IRA? " Yup. Thinking of the accounts separately because they are in different institutions is a common misconception."Example: Assume a person only has (1) Before tax IRA (rolled over from 401-K) in amount of $100,000 invested in CD's at a bank, (2) After-tax 1997 IRA in mutual fund at Vanguard (with original investment of $2,000 and current value of $1,500)." Because the person has nondeductible IRA, the "basis" must be reported to the IRS every year. The "basis" is $2000. The total value of the person's IRA is $101,500, with $2000 in money on which tax is already paid. When money is taken out, whether as a distribution or to convert to a Roth, 1.97% of it is non-taxable, no matter which accout the withdrawal is taken from. "Couldn't I just convert the (2)IRA and leave the (1) alone?" You can take any amount of money you wish from whichever account you wish, but the same calculation applies. This is a common misconception. Many (most?) people think since I have before and after tax IRAs, I'll just keep them separate and save all that paperwork. No, you might just as well mix them from that point of view. The advantage of keeping your rollover separate is that you maintain the right to roll that money from a previous employer's 401k to a future employer's 401k as long as you have not contaminated the rollover with contributory money. Once you make the Roth conversion, you can no longer roll to a future employer. But as far as what is taxable and what not, it makes no difference which money is in which account. Best wishes, Chris
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