In a previous article, you mentioned that there is a one-year rule for making conversions to an IRA. My tax accountant thinks that a conversion from a traditional tax-deferred IRA to a Roth IRA can be done more than once per year. Can you please clarify?

Your tax accountant is right.

The rule you're remembering from an earlier column applies only to 60-day IRA rollovers. It does not apply to Roth conversions, or to trustee-to-trustee transfers of an IRA from one IRA custodian to another, or to transfers from an IRA custodian into an employer-sponsored retirement plan (or vice versa).

So what is a 60-day rollover?

It's what happens when you take an IRA distribution on which you don't owe taxes because within 60 days you deposit the entire amount back into an IRA. The 60 days is a grace period in which you can replace an IRA distribution that you took by mistake or that you used as an emergency loan to yourself.

You can only do one 60-day IRA rollover every 12 months, regardless of how many IRA accounts you have. If you do more than one, any additional rollovers are treated as taxable income. And if you redeposit an over-the-annual-limit rollover in an IRA, it's treated as an excess contribution, which is subject to a 6% annual penalty until you withdraw it.

(This year, the 60-day grace period was extended from March 27 to Aug. 31, 2020. That's because the law waiving the obligation to take 2020 RMDs wasn't enacted until March 27; without the special extension, it would have been too late for people who had already taken their 2020 RMDs to redeposit them without being taxed and penalized.)

The bottom line

There is no annual limit on Roth IRA conversions.

More information

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