Do I pay taxes on Contributory ROTH or not??

[Guest jw2]

Hi- I can't believe this is so hard to figure out, but I've read thru all the IRS's forms, etc. and still am not sure of this...

I have 2 ROTH IRAs that were created in 2001. One is a ROTH Conversion (converted from a traditional IRA)- I'm fairly sure I need to report that on form 8606 and pay taxes on it this year, right?

The other is a new ROTH Contributory IRA. Do I have to pay taxes on the amount I opened it with/contributed to it or not (I did not exceed the maximum contributions- I opened it with the max amount and haven't contributed any more to it)? It seems like I would not, since it was created with after-tax income, so I shouldn't be taxed twice on it, I wouldn't think. Can anyone answer this definitively for me? I appreciate anything anyone can tell me about this-

Thanks!

[JAMES PATRICK]

You are correct in that you do not pay taxes on a contribution to a Roth account. And you fill out Part 2 for the conversion and pay taxes on the conversion.

[John G]

If the conversion was completed in 2001, then you include it on your 2001 tax return.

Just clarifying the "this year" part of your comment.

[Guest jw2]

I forgot to add something else- it's a little more confusing. I had the original traditional IRA, which I converted to a Roth conversion IRA. Then I had another traditional IRA that I rolled into that conversion IRA at a different time, which I assume counts as a second conversion, correct? So does it matter if I treat them as one conversion (there's now only one account) or as two, since they were done separately? For tax purposes I guess it's the same amount that is taxed whether I add them together or take them separately, right?

thanks,

jw

[BPickerCPA]

Treat them as one conversion. It makes no difference.

[John G]

Be sure that both conversions were completed (not requested) in the same year before you treat them as one lump.

Your original querie indicated that you had some problem understanding some of the Roth rules. I would highly recommend that even if you do not use a tax preparer that you do so this year. Be sure they have some experience with Roths and conversions and make sure they understand there were multiple transactions.