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How to Complete a Roth IRA Conversion

The ability to build your retirement nest egg with tax free savings is one of the greatest gifts that the government has ever given American citizens. If you are interested in taking advantage of a Roth IRA but do not want to start from scratch, you can do a Roth conversion with the funds from a previous employers 401k or a Traditional IRA.

Below are the steps you would take to complete a conversion at Preferred Trust Company. If you are a current client, you can skip to Step 2.

Step 1: Open a Traditional IRA Account

If you are a new client looking to establish a Self-Directed IRA account with Preferred Trust Company, it is much easier to perform a rollover or an IRA-to-IRA transfer with like-kind IRA accounts between two IRA custodians. First, complete an online application for a Traditional IRA on the Preferred Trust Company website. You must complete an application for both a Traditional IRA and a Roth IRA as the conversion will be completed once the funds for the Traditional account are received by Preferred Trust Company.

To help make it a smooth transfer process, you can refer to our Transfer Guide.

Step 2: Complete the Roth IRA Application

The online application for the Roth IRA account is the fastest and most secure method to open your account.

Step 3: Complete the Roth Conversion Form

Login to your online account portal to complete and electronically sign the Roth Conversion form to direct Preferred Trust Company convert the cash and/assets from the Traditional IRA account to your Roth IRA account. You can elect to convert the entirety of the account or just a portion to the Roth IRA.

It is important that you review Section 2 and Section 5 of the Roth Conversion form to ensure that the conversion and any tax withholdings are executed as you intended.

Processing time is 3-5 business days once we receive your completed form.

Step 4: Reap the Benefits

Once your conversion is complete, start reaping the benefits of your after-tax returns by getting your available cash invested or make a contribution to help fuel your IRA savings. And remember, please check with your CPA or tax professional before making a contribution to ensure you are abiding by all IRA contribution laws.


Q: What administrative fees are associated with the Roth Conversion?

A: If you are a new client and need to open both the Traditional IRA and the Roth IRA account, you will only be charged the $50 Establishment Fee once. If the entire Traditional IRA is converted, the Account Termination fee will not apply to close the Traditional IRA account.

The IRA Account Conversion Fee is $50 per conversion.

If you are converting assets, there may be fees associated with retitling or reregistering the asset in the name of the Roth IRA account. You will need to speak with your Investment Sponsor for this fee, if applicable.

Q: Are there penalties for executing a Roth conversion?

A: No there are no penalties. However, a conversion is a taxable event. It is recommended that you consult with a tax professional to determine the tax consequences for your situation.

Q: Is there a limit on how much you can convert in any given year?

A: No, there are no IRS limits on how much or how often you can convert funds and/or assets to your Roth IRA account each year.

Q: How do I convert current assets?

A: You will need to list each asset in Section 3 of the conversion form. A fair market evaluation form must be completed (login to your online account portal to complete and electronically sign) per asset you are converting. All converted assets must be retitled or reregistered under the Roth IRA account. If the asset is either real estate or a secured note, then a Quit Claim Deed or Assignment must be submitted to properly record the instrument under the Roth IRA.

Q: What tax forms will I receive for the tax year the conversion occurred?

A: You will receive Form 1099-R and the conversion will also be reflected on your 5498 for that tax year.

Q: Form 1099-R Withholdings, Can I elect to withhold income taxes from my IRA account?

A: You can elect to withhold taxes from the cash available in your IRA account. Taxes cannot be withheld on converted assets. The tax consequences related to those assets will come due to the IRS for the applicable tax year during tax filing. It is your responsibility to ensure that you are prepared.

If you are unsure how to complete this section, it is recommended that you consult a tax professional for assistance.

Q: What if I don’t complete the Withholding Elections?

A: Preferred Trust Company is required by law to proceed with withholding an income tax rate of 10%. It is your responsibility to complete this section to ensure accurate tax withholdings.

Q: What if I live in a State with no income tax?

A: You should select “I do not want state taxes withheld from my IRA.” in section 5.