Retirement & IRA Tax Checklist

There are actually two different five-tax-year clocks. (1) The qualified-distribution (earnings) clock starts January 1 of the year of your FIRST Roth IRA contribution and, combined with age 59.5, death, disability, or a qualifying first-home distribution, makes the covered earnings tax-free. The first-home category is subject to the $10,000 lifetime limit and the other statutory requirements. (2) Separately, EACH taxable conversion has its own five-tax-year clock that governs the 10% early-distribution penalty on the converted amount, and it mainly matters before age 59.5. Roth distributions come out in order: regular contributions first (always tax- and penalty-free), then conversions first-in first-out (taxable portion before nontaxable), then earnings. A conversion is NOT automatically 'qualified' just because its own five-year recapture period ended; the earnings clock plus an age or other qualifying event still controls.

When you convert a Traditional IRA to Roth, the taxable portion is calculated using ALL of your Traditional, SEP, and SIMPLE IRA balances combined - not just the specific account being converted. If you have any pre-tax IRA money, a portion of the conversion will be taxable based on the ratio of pre-tax to after-tax funds across all accounts.

Under Treasury final regulations (T.D. 10001, July 2024), most non-spouse beneficiaries of account owners who died AFTER their Required Beginning Date (RBD) are required to take annual RMDs in years 1-9 AND empty the account by December 31 of the 10th year after death. The transitional relief in IRS Notices 2022-53 / 2023-54 / 2024-35 waived annual RMDs only for 2021-2024; beginning in 2025, annual RMDs in years 1-9 ARE required when the decedent had already started RMDs. If the decedent died BEFORE their RBD, annual RMDs are not required during the 10 years (full balance still due by end of year 10).

Yes. SECURE 2.0 Section 333 eliminated the 10% penalty on net income attributable (NIA) from timely corrected excess contributions, effective for corrections made on or after December 29, 2022. The NIA is still taxable as ordinary income, but no Form 5329 penalty applies.