Roth income limits and converting IRA to Roth IRA (Ameritrade, fund, fees)

[loves2read]

in 2010 to boost my IRA before rolling it to a Roth--I made a 6K contribution--
problem is that MY income comes only from a teacher's pension--I have no earned income--
We have a financial advisor/CPA who failed to say that I could not fund an IRA if I did not have earned income in amount of the contribution...
just trusted that he would stop me from making a mistake...

so from what a retired-teacher-friend told me today it seems that was an illegal contribution--
is that right?

what type of penalty is assessed for something like this?

Frankly if my CPA allowed me to do it--I think he should pay the penalty...
We took the check into their office for the deposit into the Fidelity IRA account....
AND I was going to do the same thing in 2011 and convert it to a Roth...
and had emailed him about it twice w/o any info that I could not...

The only reason I can think of for him allowing that mistake is that he is just not paying attention to my side of our income situation very well...since we file jointly and my husband has income from a job as well as a separate LLC corp....

[LongArm]

When you convert a traditional IRA to a Roth (whether that Roth is established or not), that is not considered a CONTRIBUTION to the Roth.

[loves2read]

thanks--you posted to my original post--then I found out I likely made an ineligible IRA contribution so I rewrote it

[LongArm]

Ah, that IS a different question, isn't it. :-) In that case...you're STILL okay, because as long as your husband earns enough income to cover it, and as long as you're filing jointly (which you said you are), a "spousal contribution" can be made into YOUR IRA, even if YOUR don't have any earned income yourself.

[loves2read]

Gossshhhh I am glad to know that--I was so afraid that if it was a mistake, correcting it would be such a big problem and maybe red-flag us for an audit...

the info I read on line was just talking about an individual's earnings--no mention of doing it as spousal contribution...

now my CPA will think I am really nuts--or just stupid--
the stupid I don't mind--that is why we are paying him...

the nuts -- that is little different...

[LongArm]

Originally Posted by LongArm

...even if YOUR don't have any earned income yourself.

That should be "YOU," not "YOUR," of course. I hate typos.

[mathjak107]

then i wouldnt hang around in this forum. we are more interested in the information thats exchanged then playing gottcha because a word is spelled wrong. big deal!

i post alot in quite a few forums but ill be darned if im going back to check every word i type....

[LongArm]

Originally Posted by mathjak107

then i wouldnt hang around in this forum. we are more interested in the information thats exchanged then playing gottcha because a word is spelled wrong. big deal!

In case you missed it (and I can't tell from your post), my "gottcha" above was in reply to my own post. I don't care about other people's typos, only my own. I'm just critical that way.

[loves2read]

if that is how people respond to posts that are done "tongue in cheek" I don't know that I would hang around here either...

and Longarm--I am retired English teacher--so my mistakes are always more grating than those I see in others' posts...
thanks for the info AND not making fun of my ignorance

[silverfox]

Roth Conversions also start a New 5 Year Period before you can withdraw all of the funds out of the acct.

If you are over 59 1/2, you can withdraw up to the Total amout you "converted in" at any time w/out a penalty.

Personally I do not co-mingle Roth Accts.

I open a New acct. for each "Conversion Year" so I can easily keep track of each years conversions.
I have all of my Conversions with TD Ameritrade, and they do not add any extra fees for this service.

Be Aware that Conversions will be treated as income, so you need to carefully plan them to stay in the Tax Bracket that makes you comfortable.

Silverfox