Jump to content

Transfer to a Roth IRA


rblum50
 Share

Recommended Posts

I was contacted by a CPA with this question concerning one of his clients:  Client is a retired judge getting a pension from the Florida State Retirement System. Since 2017, he has been taking his retirement payments and transferring them into a Roth IRA for himself and his wife. The transfer to his wife's IRA is totally inappropriate, but, with regard to the husband, what penalties will be assessed on him for doing what he is doing?

Link to comment
Share on other sites

It's possible, but unlikely, that what he is doing is fine.

Does he (or his spouse) have earned income or W-2 compensation other than his pension?

Have the deposits to the IRA been less than the annual IRA limit and less than or equal to his earned income?

Are the deposits to his wife's IRA - spousal IRA contributions?

Were they both under age 70 1/2 in the year's this was done?

Did he treat the pension payments as taxable income in the year received and the deposits as ROTH-IRA contributions?

Is their income below then amount for making eligible ROTH-IRA contributions?

If the answer to all of the above question are "yes" then he's probably fine.

Otherwise, it sounds like he has Excess IRA Contributions for each year he has done this for himself and his wife. Excess IRA contributions are subject to a 6% excess tax each year they remain in the IRA.

Link to comment
Share on other sites

Not knowing the background, position, or skills of the original poster, I find it interesting that the question came from a CPA.  Maybe, it's just me.

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

Link to comment
Share on other sites

On 9/11/2020 at 11:24 PM, david rigby said:

Not knowing the background, position, or skills of the original poster, I find it interesting that the question came from a CPA.  Maybe, it's just me.

I was thinking the same thing.  I guess we could give the CPA the benefit of the doubt and assume s/he just took over, and/or the client has been doing this on his own but not telling the CPA since it doesn't affect any tax reporting.  Give people enough rope and they'll find a way to trip over it, or hang themselves.  Shrug.

Ed Snyder

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...