Penalty for Unqalified Conversion to Roth IRA

[mrwizard]

What is the name of your state? CA

I recently closed a Traditional IRA at Vanguard, and moved the assets to a Roth IRA at E-Trade. In doing so, I knew that I'd have to pay the amount of the transfter as additional income (in 2006). This isn't terrible, as the amount of the transfer was ~$2K.

The problem is that I performed the transfer into the Roth account without first learning the rules, and because my adjusted income is too high, I am not supposed to be able to convert to a Roth.

Can anyone advise what the penalty is, and what action(s) I can take to minimze the penalty (if any) ?

Thanks!
mwWhat is the name of your state?

 

[seniorjudge]

What is the name of your state? CA

I recently closed a Traditional IRA at Vanguard, and moved the assets to a Roth IRA at E-Trade. In doing so, I knew that I'd have to pay the amount of the transfter as additional income (in 2006). This isn't terrible, as the amount of the transfer was ~$2K.

The problem is that I performed the transfer into the Roth account without first learning the rules, and because my adjusted income is too high, I am not supposed to be able to convert to a Roth.

Can anyone advise what the penalty is, and what action(s) I can take to minimze the penalty (if any) ?

Thanks!
mwWhat is the name of your state?

Google is your friend

irs penalty unqualified conversion roth ira

 

[LdiJ]

What is the name of your state? CA

I recently closed a Traditional IRA at Vanguard, and moved the assets to a Roth IRA at E-Trade. In doing so, I knew that I'd have to pay the amount of the transfter as additional income (in 2006). This isn't terrible, as the amount of the transfer was ~$2K.

The problem is that I performed the transfer into the Roth account without first learning the rules, and because my adjusted income is too high, I am not supposed to be able to convert to a Roth.

Can anyone advise what the penalty is, and what action(s) I can take to minimze the penalty (if any) ?

Thanks!
mwWhat is the name of your state?

The money will be considered to be an early distribution rather than a roll-over. It will be subject to income tax at your marginal tax rate plus a 10% penalty.