@timw657 wrote:
I want to thank you for that explanation but admit I still find that an odd technicality and cannot understand the difference. This problem is probably not understood by thousands of people. Clearly not specifying that a Roth is not allowed, why then does the IRS have the right to declare whether I put the money in the bank or do something else with it like convert to a Roth? Do you actually mean it is not my business to do what I want with the distribution? I thought it was my money, and could convert it if I wanted. I absolutely do not wish to break the law. But I find it so difficult that this matter is not addressed in a more direct answer, such as specifying clearly that a Roth conversion is not allowed, in plain English for everyone to understand and then comply with the rules. Thanks for your reply.
The IRS does not make the rules, Congress does. The plain reading of the CARES act that Congress passed to put money into peoples pockets because they took a distribution because of COVID (such as loss of job, unable to work, etc) so they could pay their bills allows people to return the money tax free when they recover, to the same or similar account that it was taken from or to pay the tax over a 3 year period because of hardship.
It was not meant to be a "backdoor" method of making taxable Roth conversions over a 3 year period - that is contrary to the purpose of the act.
Do it if you want and let us know if the IRS disallows it.
My apologies, you are correct and I was going in the wrong direction. Your help provided the answer I needed: A Covid Distribution cannot be converted to a Roth IRA, I get it now. And a Roth Conversion is not affected by the 2020 Cares Act, these are different animals, so to speak. I do wish that the IRS had provided some way to see this more clearly by the non Tax professionals among us, since I am not any sort of Tax professional or attorney. I did not understand until now. Thank you for your patience in explaining this to me, and I hope this question and answer format can be useful to some other people who may be unclear about how a Covid Related Distribution or a Roth Conversion will be treated. Nothing has changed for how a Roth Conversion is treated, as always the entire tax expense must be paid in the year the conversion is taken. It is good to ask questions, we can always learn things that way rather than not asking, where no learning takes place at all. Thank you.
