This article explores the provisions of Internal Revenue Code (IRC) 408A and Treasury Regulation (TR) 1.408A, which provide for the conversion of a traditional IRA, or employer-sponsored qualified retirement plan (QRP), to a Roth IRA or employer-sponsored Roth plan, which are known as Roth conversions. The article begins with an abstract of IRC Sec. 408A and TR 1.408A, focusing on the provisions that provide the framework within which an IRA or QRP can be converted to a Roth IRA. An overview of the Roth conversions that are allowed by the IRS will be discussed. Several scenarios and illustrations will follow, which will highlight and quantify the potential income tax and estate planning opportunities of a Roth conversion. This will include a discussion of when a Roth conversion is appropriate, as well as the risks that could make a Roth conversion an inappropriate tax and estate planning technique.
Author: Kayla A Gehringer, CPA, MSTFP, is a staff accountant at BBD, LLP. Kayla recently completed her master’s degree in taxation and financial planning at Widener University in Chester, PA and also earned her bachelor’s degree in accounting from Widener University.
Author: James D Krouse, CPA, MSTFP, is Vice President of Finance at Sony DADC US, Inc. Jim recently completed his master’s degree in taxation and financial planning at Widener University in Chester, PA and earned a bachelor’s degree in accounting from St. Joseph’s University in Philadelphia, PA.
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