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IRA TRANSFERS AND ROTH CONVERSIONS UNDER THE CARES ACT: TODAY’S SLOTT REPORT MAILBAG

By Sarah Brenner, JD
Director of Retirement Education

Question:

I am 79 and still employed. My employer has an SEP for me and I have a Rollover IRA from a previous employer. Can I transfer my Rollover IRA to the SEP account?

Thank you,

George

Answer:

Hi George,

There are no restrictions in the tax law against combining a SEP IRA and traditional IRA that contains funds rolled over from an employer plan. This is because once a SEP contribution is made to a SEP IRA, the funds are treated like any other traditional IRA funds and can be combined with other traditional IRA funds. The only issue you may encounter is that some custodians will not allow funds other than SEP contributions to be contributed to a SEP IRA. This is a restriction put in place by custodians and not the tax code.

Question:

To the IRA Experts:

I attended one of your webinars back in August. Regarding the CARES Act and the 2020 RMD waivers, one question was: Can 2020 RMDs be converted to Roth IRAs? The answer was – Yes – because they are no longer RMDs

As a follow-up to that, I have a beneficiary IRA from my Dad who passed away in 2005 and I’ve been taking RMDs each year since then.  I want to convert this year’s “RMD” to a Roth.  Can you please tell me the process of how to do that? Any help would be appreciated.

Thank you!!!

Becky

Answer:

Hi Becky,

You are correct that the CARES Act waiver of RMDs means that for many IRA holders those funds can be converted to a Roth IRA in 2020. However, the rules work a little differently for nonspouse beneficiaries. That is because funds in an inherited IRA are not eligible for conversion by nonspouse beneficiaries. While the CARES Act does give you a break and waives the RMD from the IRA you inherited from your dad, it does not change the rule that funds in this inherited IRA cannot be converted.

https://www.irahelp.com/slottreport/ira-transfers-and-roth-conversions-under-cares-act-todays-slott-report-mailbag

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Investment advisory services are offered through Foundations Investment Advisors, LLC and is a SEC registered investment advisor.

Investment advisory services are offered through Donato Wealth Management and is a SEC registered investment advisor.