A Roth IRA transfer is also called a “conversion.” A Roth IRA can be either an annuity or account that is used as a personal savings plan to help prepare for retirement. The IRS recognises three types of transfers for Roth IRA transfer to be valid. The first type of transfer is known as a rollover. A rollover is when you transfer the withdrawal from your traditional IRA into a Roth IRA. When the owner performs the rollover, it must follow the 60-day rule states the wording in IRS Publication 590.
The second types of transfers involve trustees. The IRS states that a trustee is responsible for maintaining the accounts. One type of trustee transfer is termed a “single trustee transfer”. Where there is one trustee handling both your traditional and Roth IRAs and the owner transfers funds from one IRA to the other.
The third type is termed a “trustee to trustee transfer”. In this case there are two trustees the first one is handling the traditional IRA and another one handling the Roth IRA. One trustee transfers funds to the other trustee.
60-Day Rule
The IRS Publication 590 states that the owner must complete the Roth IRA transfer within 60 days after the date of receiving the distribution. This rule applies only if the owner performs a transfer, however. If transfer is performed using “single trustee” or “trustee-to-trustee” transfer type, the 60-day rule does not apply.
Plan Transfer Rule is a transfer type where the can transfer all or part of any distribution received from IRA-stipulated plans. If the distribution is from of an annuity plan or a tax-sheltered annuity plan it can be transferred to a Roth IRA. The owner can also transfer the distribution received from the employer’s qualified pension, stock bonus or profit-sharing plan into a Roth IRA.
Qualified Distribution Rule according to this rule the withdrawals must be considered qualified distributions in order to follow the IRS tax laws states IRS Publication 590. A qualified distribution must be done in a timely manner. According to this rule the owner cannot receive the withdrawal before five years from the date of original contribution. If the owners receive the funds prior to this date, it will be considered an early distribution. In this case, the transaction will be considered a nonqualified distribution and a nonqualified distribution is either fully or partially taxable. The amount taxed will also depend on whether the original contribution was fully or partially taxable but there are exceptions to this rule, such as using the funds to buy or renovate first home, some medical expenses, disability, educational expenses etc.