72T conversion to roth ?
L1: 72T conversion to roth ?Thanks for all of your help. It has been and is very valuable. Can a current ira with 72T be converted to a roth currently or even with the new roth ira conversion rules scheduled for 2010, ie. convert ira to roth and pay tax over 3 yrs as long as distribution remains the same?2009-03-27 20:07, By: JJ, IP: [22.214.171.124]
L2: 72T conversion to roth ?NO. In addition, normally you set up a SEPP 72-T before you are 59 1/2 in order to take distributions without the 10% penalty for early distributions. ROTH IRA distributions are subject to the 10% penalty if taken before 59 1/2 and if taken before the funds have been in the account for at least 5 years from the time that the first CONTRIBUTIONwas made to the ROTH IRA, or before 5 years after each CONVERSIONto a ROTH IRA.2009-03-27 20:15, By: dlzallestaxes, IP: [126.96.36.199]
L3: 72T conversion to roth ?While a Roth conversion of a TIRA being used for a SEPP raises some issues, it does NOT bust your SEPP and is allowed by the IRS. The central issue is that your SEPP distribution must continue and you must also fund the conversion taxes out of that amount or from other funds you have available.
While there is normally an early withdrawal penalty on pre 59.5 Roth distributions held under 5 years, as long as your SEPP remains valid, the SEPP exception to the early withdrawal penalty also waives the Roth conversion penalty (Ref Pub 590, p 67, list of exceptions).
If the conversion is done on 2010, you can still report the conversion income in 2011 and 2012, since the SEPP is not conditioned on when your taxes are due, only on the requirement that the correct amount be distributed. In fact, a conversion would actually decrease your 2010 tax bill since the SEPP distributions coming out of the Roth would not be taxable until the later years.
If you do a partial conversion, you might incur a negligible risk from PLR 2007 20023, which busted a SEPP for doing a partial transfer, but there has been no follow up or lucid explanation of this from the IRS.
2009-03-27 22:52, By: Alan S., IP: [188.8.131.52]