By Mike Miles
July 31st, 2013 | Uncategorized
Q. I know you can transfer a Thrift Savings Plan balance directly into a Roth and pay taxes on the entire amount, which are due at time of tax filing. This causes a tax burden that may be difficult to cover with personal funds. However, is it possible to withdraw the funds directly into your checking account and within the 60-day window, still roll over these funds into the Roth, but at a level that is net of taxes? This would allow a portion of the TSP withdrawal to cover the ultimate tax liability?
A. This is a question for your tax preparer, but I believe that entire amount must be converted and the taxes paid from other funds.
August 1st, 2013 at 9:31 am
Have the financial institution withhold the amount you believe is necessary to cover you tax liability at the time you do the rollover/conversion. No muss, no fuss. The only thing you need to consider is how much you want withheld. (I did this and it worked fine.) Don’t forget your state liability.