Because at the time of conversion, that is a taxable event making the entire amount considered «after tax» contributions to the Roth IRA, just like your normal after tax contributions to the Roth IRA (even though we won't actual pay tax because we'll
rollover amounts within our deductions and exemptions).
Not exact matches
If you convert your IRA to a Roth IRA by means of an indirect conversion
within the 60 - day period, make sure your Roth IRA custodian deposits the
amount as a «Roth conversion» and not as a
rollover.
For example, if you take a distribution from your Traditional IRA in 2015 and deposit the
amount into a Roth IRA
within 60 days, that is considered a conversion and the 12 - month
rollover rule does not apply.
If you receive an IRA distribution in 2014 but roll over the
amount in 2015
within the 60 - day time frame, the
rollover will not affect your eligibility to roll over another distribution in 2015 as long as the 2015 distribution is from a different IRA.
The
amount you redeposit
within 60 days is a tax - free
rollover.
Assuming there were no after - tax contributions to your 401 (k), if you want to minimize tax implications, you should re-deposit the
amount distributed into a Traditional IRA
within 60 days of the distribution, as a «
rollover» (not regular contribution).
If I had done a regular
rollover and it was either my second of the year, or I didn't do the
rollover within the 60 day window, any previously untaxed
amounts distributed from the IRA would need to be added to my gross income, and I may be subject to the 10 % early withdrawal tax on the
amounts included in gross income as well.
Beware that when the
rollover method is used to move money from a company plan to an IRA, 20 percent of the
amount will be withheld for the IRS, even though the
rollover is tax - free if the money is in the IRA
within 60 days.