RMD's and Roth Conversions

[jnd2546]

If a taxpayer ( who's already past 70 1/2), decides in early 2019 to convert his entire traditional IRA balance to a ROTH ( before 31 Dec 2019), does he still have to take an RMD for 2019 before the conversion?

Thanks

JND

[RollTide68 · Accepted solution]

RMD is not eligible for conversion to a Roth.  

The first dollars taken from an IRA after you reach age 70-½ are deemed by the IRS as going toward the RMD. Therefore, you must distribute the RMD before any amount of your IRA is converted to a Roth. Failure to do so could result in an excess contribution to a Roth IRA. The IRS levies a 6% penalty for each year this money remains in the Roth IRA.

The pro-rata rule applies to RMDs in the same way it is used for Roth conversions. For example, an IRA owner has an account worth $100,000, of which $15,000 is after-tax contributions. The owner is over 70-½ and has to take a $3,000 RMD before converting $20,000 to a Roth. 15% of the RMD ($450) is considered after-tax and 15% of the Roth conversion ($3,000) is after-tax.

https://rodgers-associates.com/blog/are-roth-conversions-right-for-people-over/

[Just-Lisa-Now-]

@RollTide68 

Thank you for this! I was following since I didn't know the answer.  I dont think Ive ever seen a roth conversion by someone over 70½ so I never had reason to research it....now I get to add another tidbit of info into my mental rolodex!

[jnd2546]

Thank you so much!  Not surprised that RMD still required since the tax impact is the same ( both become taxable income), but lost sight of the " excess contribution" issue to the Roth and the 6% excise.

Intend to followup with taxpayer as to whether the fiduciary advised about the RMD after getting instruction to convert the entire Traditional.  Seems like the 1099R does not call out a separate RMD when they did the total conversion.