- 1). Contact your IRA custodian customer service department or financial adviser. Request the cost basis of your IRA account. (The cost basis refers to all the contributions you have made.) Since you did not deduct these contributions upon contributing, you will not pay taxes on them when you convert. The earnings in the account will effectively become a portion of your ordinary income when you convert.
- 2). Request a conversion packet from your existing IRA custodian. You don't need to change custodians to do this, but you can convert and transfer the assets to another custodian if you desire. Fill out the forms, then sign and submit them.
- 3). Hold the assets in the Roth IRA for at least five years to reap the tax-free benefits. Taking distributions of funds you have not held for at least five years results in a tax penalty on the assets.
- 4). Provide your 1099-R to your tax adviser when you file your taxes. The amount of the earnings will appear on your 1099-R. Take steps to include this information in your adjusted gross income.
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