Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev Thread | Next Thread
Author: planojake Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 120816  
Subject: Rolling IRAs into Roth IRAs Date: 8/19/1997 1:25 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
1. I've read that a "Taxpayers" AGI must be less than $100k to allow a rollover from an existing IRA into a Roth IRA. Elsewhere there are specific references to single and joint filer limits, on rollovers I've only seen the $100k limit. Is the limit the same for Joint & Single filers, or can joint filers have a higher AGI and still take advantage of the ability to roll existing IRAs into a Roth IRA?

2. Can the taxes due on a rollover from a regular IRA to a Roth IRA be paid from the distribution without penalty? In other words, can you take your $10,000 IRA distribution, pay $2,800 in taxes and then establish a Roth IRA with the remaining $7,200 with no early distribution penalty? Does the answer to this question differ if there is enough non-deductable basis in the current IRA to cover the taxes?

Thanks,

Scott
Print the post Back To Top
Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 209 of 120816
Subject: Re: Rolling IRAs into Roth IRAs Date: 8/20/1997 11:54 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
<<1. I've read that a 'Taxpayers' AGI must be less than $100k to allow a rollover from an existing IRA into a Roth IRA. Elsewhere there are specific references to single and joint filer limits, on rollovers I've only seen the $100k limit. Is the limit the same for Joint & Single filers, or can joint filers have a higher AGI and still take advantage of the ability to roll existing IRAs into a Roth IRA?>>

Here we go, Scott. Lets try to shed some light on the subject.

The $100k limit IS the same for Joint filers, Single filers, and Head of Household filers. Married-Separate filers can NOT make a rollover under any circumstances (so they've closed that loophole to get a $200k AGI limit for married taxpayers to make the rollover).

<<2. Can the taxes due on a rollover from a regular IRA to a Roth IRA be paid from the distribution without penalty? In other words, can you take your $10,000 IRA distribution, pay $2,800 in taxes and then establish a Roth IRA with the remaining $7,200 with no early distribution penalty? Does the answer to this question differ if there is enough non-deductable basis in the current IRA to cover the taxes?>>

Nope. No good. The entire balance of the IRA must be turned over. Anything less would be considered a non-qualifying distribution, subject to both tax AND penalty. So if you are considering a rollover, you'll have to find the tax dollars somewhere else.

And the answer to the question is the same regardless of your basis (i.e., prior non-deductible contributions) in the previous IRA.

Not the answer you're looking for, I'm sure. But it is the best that I can give you.

TMF Taxes
Roy

Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
Author: sira Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 211 of 120816
Subject: Re: Rolling IRAs into Roth IRAs Date: 8/20/1997 6:52 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Now, if the AGI for joint filers is capped at $100K, and if I *still* want to move from a regular IRA to a Roth IRA, what are the penalties that I have to pay? I have put in $4000 of my AFTER-TAX money into an IRA (implementing the Foolish Four) and expect to have a gain of about $700 to $1000 by the end of this year. Is there a way out for me?

Thanks,

--Sira.


Print the post Back To Top
Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 223 of 120816
Subject: Re: Rolling IRAs into Roth IRAs Date: 8/21/1997 11:02 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
<<Now, if the AGI for joint filers is capped at $100K, and if I *still* want to move from a regular IRA to a Roth IRA, what are the penalties that I have to pay? I have put in $4000 of my AFTER-TAX money into an IRA (implementing the Foolish Four) and expect to have a gain of about $700 to $1000 by the end of this year. Is there a way out for me?>>

Can't do it, Sira. If you are over the AGI limit of $100k, you are PROHIBITED from making the transfer to a Roth IRA. If you try to do this, the entire distribution from your existing IRA will be treated as premature, and taxed/penalized accordingly. Any any attempted transfer to the Roth IRA will be ignored.

Your only real course of action would be to start a new Roth IRA from scratch. While the AGI limitation on a transfer is $100k, the limitation for STARTING a new Roth IRA is $150k for joint filers, and $95k for single filers. Between $150k and $160k ($95k to $110k for single filers) there is a phase in period where the contributions will be limited.

But because of the AGI differences, it may not be possible for you to "rollover" existing IRAs to Roth IRAs ($100k limitation), BUT you may be able to begin a brand new Roth IRA ($150k limitation for married folks).

You'll have to check it out and see what might work for you.

TMF Taxes
Roy

Print the post Back To Top
Author: sira Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 239 of 120816
Subject: Re: Rolling IRAs into Roth IRAs Date: 8/21/1997 2:12 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Follow-up question.

Is there a deadline for these rollovers? That is, let's say that right now, we (my wife and I) are ineligible to rollover our IRAs to Roth IRAs because of AGI restrictions. Suppose, she decides to quit work in 1999 or go part-time so that our AGI then drops below $100K. Can we rollover our IRAs then?

Thanks,

--Sira.


Print the post Back To Top
Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 246 of 120816
Subject: Re: Rolling IRAs into Roth IRAs Date: 8/22/1997 10:37 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
<<Is there a deadline for these rollovers? That is, let's say that right now, we (my wife and I) are ineligible to rollover our IRAs to Roth IRAs because of AGI restrictions. Suppose, she decides to quit work in 1999 or go part-time so that our AGI then drops below $100K. Can we rollover our IRAs then?>>

It appears to be on a year by year determination, Sira. Nothing in the law (that I can find) says that if you are inelegible for one year, you are ineligible for the rest of your life.

If your income status changes, and you then fall below the AGI restrictions, it appears that you would then be able to make the rollover....regardless of if that were one, two, three, or any number of years into the future.

At least until they change the law again ;-)

TMF Taxes
Roy

Print the post Back To Top
UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev Thread | Next Thread
Advertisement