You may be able to convert amounts from either a traditional, SEP, or SIMPLE IRA into a Roth IRA. You may be able to recharacterize contributions made to one IRA as having been made directly to a different IRA. You can roll amounts over from a designated Roth account or from one Roth IRA to another Roth IRA.
Conversions
You can convert a traditional IRA to a Roth IRA. The conversion is treated as a rollover, regardless of the conversion method used. Most of the rules for rollovers, described in chapter 1 under Rollover From One IRA Into Another, apply to these rollovers. However, the 1-year waiting period does not apply.
Conversion methods. You can convert amounts from a traditional IRA to a Roth IRA in any of the following three ways.
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Rollover. You can receive a distribution from a traditional IRA and roll it over (contribute it) to a Roth IRA within 60 days after the distribution.
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Trustee-to-trustee transfer. You can direct the trustee of the traditional IRA to transfer an amount from the traditional IRA to the trustee of the Roth IRA.
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Same trustee transfer. If the trustee of the traditional IRA also maintains the Roth IRA, you can direct the trustee to transfer an amount from the traditional IRA to the Roth IRA.
Same trustee. Conversions made with the same trustee can be made by redesignating the traditional IRA as a Roth IRA, rather than opening a new account or issuing a new contract.
More information. For more information on conversions, see Converting From Any Traditional IRA Into a Roth IRA in chapter 1.
Failed Conversions
If, when you converted amounts from a traditional IRA or SIMPLE IRA into a Roth IRA, you expected to have modified AGI of $100,000 or less and a filing status other than married filing separately, but your expectations did not come true, you have made a failed conversion.
Results of failed conversions. If the converted amount (contribution) is not recharacterized (explained in chapter 1), the contribution will be treated as a regular contribution to the Roth IRA and subject to the following tax consequences.
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A 6% excise tax per year will apply to any excess contribution not withdrawn from the Roth IRA.
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The distributions from the traditional IRA must be included in your gross income.
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The 10% additional tax on early distributions may apply to any distribution.
How to avoid. You must move the amount converted (including all earnings from the date of conversion) into a traditional IRA by the due date (including extensions) for your tax return for the year during which you made the conversion to the Roth IRA. You do not have to include this distribution (withdrawal) in income.
Rollover From a Roth IRA
You can withdraw, tax free, all or part of the assets from one Roth IRA if you contribute them within 60 days to another Roth IRA. Most of the rules for rollovers, described in chapter 1 under Rollover From One IRA Into Another, apply to these rollovers. However, rollovers from retirement plans other than Roth IRAs are disregarded for purposes of the 1-year waiting period between rollovers.
A rollover from a Roth IRA to an employer retirement plan is not allowed.
A rollover from a designated Roth account can only be made to another designated Roth account or to a Roth IRA.
