Today TaxMama hears from Mike in the TaxQuips Forum with this question. He says, “My IRA’s expire in 12 months. Can I move them to a Roth without paying taxes or penalties or re-invest in 6 month CD?
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Dear Mike,
The thing that is expiring is the CD or other investment where you have put your IRA funds. Is that right? Your IRA does not expire – not even if you do. Our IRAs live on, long after we die – and remain taxable, too!
OK, now, to your question about moving the money to a Roth without paying taxes? I haven’t a clue. So sorry, no one could answer a wide-open question like that.
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It all depends on your tax bracket, and how much money you have in the IRA and whether or not you have any basis in the IRA.
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Consider either testing out the tax effect of the conversion yourself, or sitting down with a tax pro to help you.
Fundamentally, when you roll the IRA over to a Roth IRA, you will pay tax on the entire amount of money in the IRA. If there was any portion of your IRA contributions that was paid with after-tax dollars, you can reduce the amount that is taxed.
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What you will not pay – is any penalty for drawing the money out from your IRA.
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You can move the money to any other financial institution – like a brokerage, mutual fund company, another bank, etc. As long as the new account at the new financial institution is set up as an IRA, you won’t pay any taxes on that rollover. You will pay taxes if it’s a Roth IRA.
I hope that helps? A bit?
And remember, you can find answers to all kinds of questions about IRAs, Roths, and other tax issues, free. Where? Where else? At www.TaxMama.com.
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