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403(b) directly converted to Roth IRA - withholding issue

Guest orangegrease

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Guest orangegrease

I directly converted the entirety ($10,000 to keep the numbers simple) of a 403(b) fixed annuity to a Roth IRA and the financial services company withheld 20% ($2,000) because I did not indicate on the form to not withhold. Thus, $8,000 ended up in the Roth IRA.

I wanted to maximize the amount in the Roth (the full $10,000) and not use tax advantaged funds to pay the taxes. If the financial services company does not refund the withheld $2,000 amount, I am looking for an alternative way to get the withheld amount back into tax advantaged status.

I know when an IRA distribution is received and taxes withheld it is possible (within 60 days) to put the entire amount back into an IRA by using outside funds to pay back the amount withheld. Something similar is what I would like to do in this case but am not sure if it is allowable.

Could I pay back the amount withheld right into the conversion Roth IRA without any recharacterization or redesignation?

Is it permissible to redesignate this type of conversion (403b directly to Roth)? I.e., leave the $8,000 in the same account and just have the title changed from Roth IRA to Traditional IRA. If so, could I put the withheld amount back into the redesignated IRA?

Is it permissible to recharacterize this type of conversion (403b directly to Roth)? If so, should the transfer of $8,000 be into a Traditional IRA or back into the original 403(b) account source of the funds? Presumably interest on the $8,000 since the conversion should be added but I am not sure. Using outside funds, could I put the withheld amount back into the account receiving the $8,000 (plus interest)?

If the above is all wrong, can you think of any other way to get the $2,000 withheld back into a tax advantaged account in a way which will pass muster with the IRS?

Thank you very much for any suggestions, theories, etc.

(this was also posted in Roth IRA forum)

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