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September 27, 2022

Is My Roth IRA Conversion Subject to the 10% Early Distribution Penalty?

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Is My Roth IRA Conversion Subject to the 10% Early Distribution Penalty?

I converted $50,000 from my Traditional IRA to my Roth IRA a few weeks ago. I was exactly age 59 at the time. I know that I will need to pay income taxes on the amount. But I am receiving conflicting information about whether I will owe the IRS a 10% early distribution penalty on the $50,000. Will I owe the IRS a penalty because I was under age 59 ½ when I did the conversion?

IRA Frequently Asked Questions
FAQ – Frequently Asked Questions

No. A Roth IRA conversion is a two-part transaction- a distribution and rollover to the Roth IRA as a conversion. If a distribution occurs before the IRA owner reaches age 59 ½, the distribution amount is subject to a 10% early distribution penalty, unless an exception applies. One of the exceptions is amounts converted to a Roth IRA. As such, you do not owe the 10% early distribution penalty on your Roth conversion amount.

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

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