If you convert a traditional IRA to a Roth IRA and all the funds were deposited into the traditional IRA as non-deductible contributions, and there is no gain, and thus there is no income by the conversion, should the conversion increase your income and thus your Expected Family Contribution (EFC) using federal financial aid rules in the FAFSA? This is
Parents' Untaxed Portions of IRA Distributions (question 94e) of the FAFSA. When doing an IRS transmittal, the question 94e is filled in with the filed value of
Example scenario, contribute $1,000 to a traditional IRA on April 1, 2014 bringing your total IRA balance to $1,000 then do a Roth conversion on April 30, 2014 of the $1,000 which has been in cash and had no gain. Should $1,000 now count as income for FAFSA purposes in 2014? It would seem FAFSA online app says yes, but that makes no sense to me, this accounting did not create any income, same result could have been achieved by $1,000 Roth contribution directly originally, so why the penalty?