We are being taxed $600.00 for a penalty for converting $10,000.00 ($5,000.00 each) to two Roth IRAs from our traditional IRA's.Why is this?

Forum|Forum|1 year ago
March 18, 2025
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MayaD

There isn't a penalty for converting a traditional IRA to a Roth IRA. However, a conversion to a Roth IRA results in taxation of any untaxed amounts in the traditional IRA.

irs.gov

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dbwhite76Author

The taxes were paid when the money was converted. TurboTax came up with the Penalty because they Said that our AGI was zero, which obviously it is not.

According to the IRS, we can convert up to $7,000.00 each.

SusanY1

If taxes are withheld at the time of the conversion, credit is given for that from the 1099-R entries. The full tax is then reconciled on the tax return when you file at the end of the year. It can be more or less than the withholding paid at the time of the conversion.

However, that is different from a penalty - so it sounds like something else may be going on here. Where are you seeing the $600 tax or penalty that is of concern? A little more detail may allow us to help you troubleshoot this better.

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