One common topic that comes up when planning for the next tax year is the proper way to rollover or convert existing IRAs (Individual Retirement Accounts). Below are some general rules and tips on these processes. To discuss particular questions, or how to best plan for your specific tax situation, give me a call or send an email anytime.

  • If you roll over your employer-sponsored 401(K) into an IRA (or vice versa), or if you transfer funds between one IRA and another, the funds are not considered a taxable distribution as long as the total withdrawn makes it into the new account within 60 days.

  • You can only make one rollover between IRAs per year, no matter how many accounts you have. However, it is only considered a "rollover" if the money is withdrawn at some point; if an amount of money is transferred directly from one IRA account to another and never distributed, this may be done an unlimited amount of times.

  • Transferring money from a traditional IRA into a Roth IRA is called a "conversion" and is also not limited to one per year.

  • The IRS "aggregates," or considers all IRA accounts as one, for tax purposes. This becomes relevant if more is contributed to an IRA than is tax deductible, because for all future distributions, the amount that was contributed after-tax must be calculated. This also means that when we discuss how much can be contributed to an IRA or withdrawn per year, we are always talking in total, not into each account.