Will I incur taxes for exchanging funds in a Roth IRA mutual fund (Vanguard) for a Roth IRA brokerage account?
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1 Answer
For a trustee-to-trustee asset transfer from a mutual fund inside a Roth IRA to a brokerage account inside a Roth IRA, no. If you take a distribution mutual fund Roth IRA with the intention of paying the money into your Roth IRA brokerage account, then taxes may be withheld from the distribution. In this case, you will need to come up with the difference (amount withheld for taxes) out of pocket so as to put the same dollar amount that you took from the mutual fund Roth IRA as a distribution into the Roth IRA holding the brokerage account.
answered Jul 25, 2018 at 15:31
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Are you sure? An 'eligible rollover distribution' from a traditional IRA or employer plan is required to have 20% withholding, which you must make up to complete a full rollover, but I've never seen any such provision for Roth. Pub 590A talks about this in chapter 1 (trad) but not chapter 2 (Roth). (And for completeness, there is definitely no actual tax; if there is withholding, you get it back next filing season.) Commented Jul 27, 2018 at 15:54
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@dave_thompson_085 Most partial withdrawals from a Roth IRA account are distributions of contributions (which are tax-free) because contributions come out first in the order they went in. A complete withdrawal will likely involve some earnings which don't meet the five-year rule, and thus possibly are subject to penalty tax if they don't get put back into a Roth IRA in timely fashion, something which the current IRA custodian has no control over; the IRA owner might change his/her mind, miss the 60-day deadline, etc. Commented Jul 27, 2018 at 16:29
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A full Roth withdrawal that is not actually rolled-over will be partly taxable yes, but I still see no provision for withholding unless you request it, which since this Q is for rollover you would not. Commented Jul 28, 2018 at 1:22