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Roth IRA Rules - multiple accounts, state income tax on qualified rollovers

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  • jfoxcpacfp
    replied
    Originally posted by CFEonline View Post
    Got it, thanks!

    Regarding state income tax, if I moved out of California to a state without income tax, will I still be hit with California state income tax on the SEP-IRA (pre-tax) to Roth-IRA rollover, or just the federal? The rollover would be done during a period I lived in the no state income tax state.

    Thank you
    Yes, this shouldn't be a problem once you have completely moved. If you are talking about a large conversion, you might want to wait until the next tax year. For example, if you moved from CA to TX this year, you're in a good spot - it's almost year-end, so file your final CA return (part-year) for 2019 then convert in 2020. Good luck!

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  • Hank
    replied
    Once you've severed all ties with California, the Franchise Tax Board should have no further claims on your income. (Convincing the FTB that you're no longer a California resident and now beyond their reach may be quite an undertaking!)

    Leave a comment:


  • CFEonline
    replied
    Got it, thanks!

    Regarding state income tax, if I moved out of California to a state without income tax, will I still be hit with California state income tax on the SEP-IRA (pre-tax) to Roth-IRA rollover, or just the federal? The rollover would be done during a period I lived in the no state income tax state.

    Thank you

    Leave a comment:


  • jfoxcpacfp
    replied
    Ah - much easier to follow. Thank you!
    1. Yes, as long as you do not exceed the annual contribution limitation when aggregating all accounts, i.e. $6k spread among all accounts (2020)
    2. Depends on state law. For example, in KY, an IRA conversion that is taxable at the federal level is considered "retirement income" at the state level. KY exempts the first $31,110 of retirement income per person from taxation. In other states, which have no retirement income exemption, you'll be taxed. Some states may have other regs. stipulating what is defined as retirement income and may not include conversions, etc. And yet other states (TX, FL, TN, for example) do not tax income, so the conversions would not be taxed, no matter the amount.

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  • jacoavlu
    replied
    1 yes
    2 I don’t know

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  • CFEonline
    replied
    The questions boil down to

    1.) Can one have multiple different Roth IRA accounts, and contribute to each of them either through the backdoor or qualified plan roll-over in the same year?

    2.) If rolling over a sum from a qualified pre-tax plan to a Roth IRA, how is the state income tax determined? Specifically if one has moved and lived in two different states that year.

    Thanks!

    Leave a comment:


  • jfoxcpacfp
    replied
    To try to help you along with the confusion over Peds word frugality, would you mind posting your questions separately? Much of the rest of your post (and not just you but most initial posts) is extraneous, so no offense intended. Many of us simply don’t have the time to parse it all.
    Peds, however, is a true minimalist, at least when he’s at the keyboard.

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  • CFEonline
    replied
    What does it depend on?

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  • Peds
    replied
    Yes.
    Convert.
    Depends.

    Leave a comment:


  • Roth IRA Rules - multiple accounts, state income tax on qualified rollovers

    I am looking for advice from the forum's fund of knowledge regarding the particulars of the following

    Can you have multiple Roth IRA accounts? My reading of the IRS site indicates yes, as long as you respect the one annual contribution limit across all of them. Is that accurate, or is there any more nuance to it? I am specifically looking at doing the backdoor Roth IRA (contribute to traditional IRA, convert to roth) at one brokerage, but have a SEP-IRA at another brokerage. To do the backdoor Roth I need to empty the SEP, and am considering opening a Roth IRA at the brokerage my SEP resides to roll the SEP out to the Roth by Dec 31st (the tax implications are acceptable, and likely more favorable than they will again be for at least a decade). So, can I open Roth IRA at brokerage # 2 where SEP is, which would be a second Roth IRA for me, and rollover there, in the same year that I at brokerage # 1 have made a traditional IRA contribution, and am planning to convert that to the Roth IRA I have there?

    For a rollover from a qualified plan (pre-tax) to a Roth IRA, a 1099-R will be generated with a "G" code on line 7 (I believe), indicating this is a taxable event. If I lived in a high income tax state for part of the year, and moved to a more favorable income tax state for the latter part of the year, which state counts the rollover as taxable income? My understanding is if the date you become a permanent resident of the new state is after July 1, the old state collects the income tax, and if it is before that date, the new state collects the income tax. Or are they both going to try to get their fingers in the pie?

    Thanks, Merry Christmas/Happy Holidays!
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