Accountant dopers. COnversion of a Trad IRA to Roth.

Factual Questions
1

In December 2006 I sent $3K to Schwab for a 2006 IRA contribution.

In Feb 2007, when I went to file my taxes, my CPA told me that I could not contribute to a traditional IRA because of earnings and my other 401K contributions etc. Instead it should be a Roth IRA which I was qualified to fund for 2006. I guess I should have asked him first eh?

I called Schwab in March and we changed the traditional to a Roth over the phone.

No deduction was taken on my 2006 return for the $3K. It was reported as a Roth contribution.

Today, I received a 1099 from Schwab indicating that I had taken a distribution of about $3100 from the traditional IRA.

Now, I have a CPA but I like to be ahead of the game. What does he need to do so that the IRS does not levy tax on the $3100. Specifically, what forms should be used.

Any other advice? Thanks.

2

Too late to edit, but I should add that I am nowhere near 59½.

3

Look on your 1099 in Box 7 (Distribution code). If it has a “G” indicating a direct rollover, you don’t need to do anything with regard to taxes.

I’m not sure what the rules are about converting to a Roth from Traditional, but I know I got a 1099 when I changed from one IRA to another with a different company.

If it has something other than a “G”, call your broker or CPA and ask them about tax consequences.

4

You probably could have contributed to a Traditional IRA, but you income was too high for it to be deductible, so that is why your accountant suggested a Roth.

Direct link to Pub 590 (PDF) here
pg. 64

You had (or Schwab was supposed to) done a conversion. They should have coded it correctly, but if they did not, your accountant would probably have to manually override the tax and put a note in saying that you converted it. You shouldn’t face any problems with the IRS. The form you use is the same as for a regular contribution, although it might be the other page?

I should point out that if it wasn’t rolled over, then you would face taxes and penalties. This is $310 on Federal alone plus tax, state may have even more.

5

No it was converted directly by Schwab.

Thanks