Roth SEP IRA
Roth SEP IRA
Has anyone heard of anyone doing the new Roth SEP IRAs created this year as part of the secure act 2.0?
Re: Roth SEP IRA
I don't believe they are available yet.
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Re: Roth SEP IRA
Don't know how useful this is. You have always been able to contribute to a SEP-IRA and then convert it to a Roth the next day.
Re: Roth SEP IRA
Thank you Billaster - Are there income limits on the roth conversion?
Re: Roth SEP IRA
There are no income limits on any Roth conversion. You just need to be willing to pay the taxes, which would be exactly the same as if you directly deposited into a Roth SEP.
There may be a slight complication if you have other traditions IRAs with after-tax contributions. You must add together all of your IRAs including your SEP when figuring if you have a pro-rated pre-tax and after-tax Roth conversion. But in this case, it would reduce the amount taxed in your SEP to Roth conversion and just requires filling out Form 8606 to keep track of the remaining after-tax contributions.
Also keep in mind that you cannot withdraw conversion money for five years. This is one difference from a direct Roth contribution which you can withdraw at any time.
Re: Roth SEP IRA
Probably not available yet due to technical limitations. Remember that both pre tax and Roth contributions have never been allowed in the same IRA account before, so this will require major processing platform updates. Once activated and there are both pre tax and Roth accounts in a SEP IRA, its a very small step to allow all IRAs to hold pre tax and Roth sub accounts, ie you would not need to have a separate TIRA and Roth IRA. In addition, the IRS will have to provide regulations, revise Form 5498 and perhaps 5329 and 5330. Even Form 8606 will have to be amended. Any Roth balance in a SEP or SIMPLE IRA should not be reflected on line 6 of Form 8606, so the line 6 instruction will have to be changed.
This provision is optional for IRA custodians, and many may not rush to the head of the line.
Re: Roth SEP IRA
Thank you for taking time to explain all the issues.