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Author: papaduke101 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121219  
Subject: Roth Coversion/MRD Date: 8/19/2007 3:58 PM
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I am considering converting a small Traditional IRA into a Roth IRA with the same trustee after this year's MRD is completed. The Traditional IRA was funded with Deductible & Non-Deductible contributions. I realize that I will have to complete Form 8606 next year when I do 2007 taxes, but I am not sure if there is any requirement to withhold Fed Taxes this year. Will the net IRA value, after MRD, be transferred into the Roth or must I request the trustee to withhold a specific % for Fed Taxes, thereby reducing the net IRA value that is transferred?
Appreciate any insights or recommendations.

Joe
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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: 95586 of 121219
Subject: Re: Roth Coversion/MRD Date: 8/19/2007 4:08 PM
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I am considering converting a small Traditional IRA into a Roth IRA with the same trustee after this year's MRD is completed. The Traditional IRA was funded with Deductible & Non-Deductible contributions. I realize that I will have to complete Form 8606 next year when I do 2007 taxes, but I am not sure if there is any requirement to withhold Fed Taxes this year. Will the net IRA value, after MRD, be transferred into the Roth or must I request the trustee to withhold a specific % for Fed Taxes, thereby reducing the net IRA value that is transferred?
Appreciate any insights or recommendations.


There is never a requirement that tax be withheld on a traditional IRA distribution or Roth conversion.

After you take this year's MRD, if you want to convert the balance of your traditional IRA to a Roth, you will notify your trustee to make the conversion. The amount converted, less any after-tax basis in the IRA, will be taxable income in 2007 (assuming the conversion occurs this year). You may choose to have the trustee withhold taxes from the conversion, make an estimated tax payment, adjust other withholding (if you have some), or defer paying any of the tax until you file your 2007 tax return. Note, that if you choose the last option, you might be subject to underpayment penalties (depends on your total tax situation).

Ira

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Author: papaduke101 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 95587 of 121219
Subject: Re: Roth Coversion/MRD Date: 8/19/2007 4:14 PM
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Thanks for the prompt, clear reply, IRA. I think I have done an accurate Safe Harbor plan for this year, so I will plan to maximize the amount transferred and hopefully benefit more if the market goes up.

Joe

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