IRA Rollover

Archive for December, 2005

Question: If you don’t have to file IRS forms when making a Roth IRA Contribution each year, how does the IRS know how

many years of contributions you should have in there? I’m consolidating a bunch of rollover iras into a a Roth, paying taxes on the money going in, and then combining that with my original roth ira. I understand that the IRS will have records of the taxes I paid on the rollover acocunts but how does it know I didn’t overload my original roth throughout the years, etc.

Answer: When you convert to a Roth IRA from a traditional IRA, the taxes are due in the year of the conversion. You would show the conversion on line 11 a and b on the form 1040A or 15 a and b on the form 1040. The amount taxable on the b line transfers to part 2 of the form 8606 and is not subject to the additional tax for early distribution.
Publication 590

http://www.irs.gov/publications/p590/ind

Tax Deduction Tips : IRA Tax Penalties