Can I move funds from a Roth IRA to a Traditional IRA without it being considered a conversion?
Tuesday, April 20th, 2010 at
1:39 am
So I contributed to a Roth IRA account for 2009 and didn’t realize until I started doing my taxes that I should have contributed to a Traditional IRA to be qualified for a deduction. Can I move those funds from the Roth IRA to the Traditional IRA without it being considered a conversion? Just hoping there was something I could do to fix it since I know you have up until April 15th to contribute for the previous year.
Filed under: Contributions To Self Directed IRA
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Taxes are due on the amount rolled over, but the 10% penalty on early withdrawal from an IRA is waived. You can transfer money into a Roth IRA if your adjusted gross income is no more than $100,000 in the year you make the transfer.
You can "undo" an erroneous contribution if you do it before April 15th. Contact the company you opened the Roth IRA with and they can tell you what to do. You will get paperwork on this for next tax season, but just be sure to hang on to them and give them to your tax preparer next year.
The advantage of the traditional IRA is the tax deduction. If you don’t need a tax deduction (like, you’re in the 10% tax bracket), leave it in the Roth. It will still grow tax-deferred, and under most conditions you can take it out taxfree.
(Assuming Congress doesn’t change its mind because they need more money.)
Why would you do that? All investment distributions from a TRADITIONAL IRA are taxed as ordinary income. The ROTH IRA contributions have already been taxed. This makes absolutely no sense. Leave it in the ROTH IRA account.
If your income exceeds the ROTH IRA qualification limits, I recommend seeking a tax professional for assistance.