TL;DR
A Roth conversion can fail on paperwork, not strategy. Five operational errors cause most of the damage: sending money to the wrong account type, contributing to a Roth IRA above the income limit, breaking the 60-day or one-rollover-per-year rule, missing the deadlines on an inherited Roth account, and converting with no plan to pay the tax. Since 2018 a conversion can’t be recharacterized, so prevention matters more than repair. The fixes are practical: confirm account types from custodian records and tax forms, use trustee-to-trustee transfers, check Roth eligibility every year, take any RMD before converting, keep beneficiary forms current and decide how the tax will be paid before the money moves.
About the Author
Nathan Krampe, CFP®, CPWA®, is the founder and Chief Investment Strategist of Lion’s Wealth Management, a fee-based, rules-based fiduciary firm in St. Louis Park, Minnesota. Over two decades in the industry, he has worked exclusively with business owners, executives, and their families navigating the transition into retirement. Krampe has been featured in the Wall Street Journal’s “Ten Five Star Wealth Managers You Need to Know” and was named a 2026 Five Star Wealth Manager. He holds the CERTIFIED FINANCIAL PLANNER™ and Certified Private Wealth Advisor® designations and serves as a fiduciary for every client relationship.
You and your CPA have run the numbers. You looked at this year’s income, your tax bracket and your timeline, and you decided that a Roth conversion makes sense. The strategy is sound.
Then a transfer form goes in with the wrong account number. Or an automatic contribution keeps running after your income rises past the limit. Or a check you carried to a new custodian uses up your one rollover for the year. None of these is a strategy mistake. All of them can undo the strategy.
That’s the gap this article covers. A Roth conversion isn’t only a decision. It’s a series of operational steps, and each step has a form, a deadline or a default setting that can go wrong. Below are five places it happens, how to prevent each one, and the repair options that exist when it does. Every example is a hypothetical, and repair options always depend on the facts.
Why a sound plan can still fail
The IRS counts a conversion by its paperwork, not by your intention. Roth treatment follows what the account records say, what the tax forms report and what the dates show.
Two forms carry that record. Form 1099-R reports a distribution, and box 7 holds a code that describes the kind of transaction. Form 5498 reports what went into an IRA, and box 7 shows which type of IRA it is: traditional, SEP, SIMPLE or Roth. Form 5498 is filed by the end of May following the year, so it can reach you after you have filed your return. When you want to know what the IRS believes happened, those forms matter more than the title printed on a statement.
| Error | What it looks like | The prevention | If it already happened |
|---|---|---|---|
| 1. Wrong account or transaction | Pre-tax money lands in a Roth IRA, or Roth 401(k) money lands in a traditional IRA | Confirm account types from records and tax forms, put instructions in writing, verify where the money landed | Gather documentation, ask your CPA about correction options, which can include asking the IRS for relief |
| 2. Contributing above the income limit | An automatic contribution outlives your eligibility | Check eligibility every year and after any raise or equity event | Withdraw the excess with earnings by the deadline, or recharacterize it, then file Form 5329 if needed |
| 3. Rollover timing and frequency | A second IRA-to-IRA rollover in 12 months, or a missed 60-day deadline | Use trustee-to-trustee transfers | The 60-day deadline can sometimes be waived. The one-rollover rule cannot |
| 4. Inherited Roth rules | Heirs assume "no RMDs" means no deadline | Name primary and contingent beneficiaries, read the custodian's defaults, match the estate plan | File Form 5329 to ask for a waiver of the excise tax for reasonable error |
| 5. No plan to pay the tax | A conversion with no withholding or estimates, an RMD converted by mistake, or an employer Roth election nobody planned for | Decide how and when the tax will be paid before you convert | A conversion cannot be recharacterized. Adjust withholding or estimates promptly |
Error 1: The wrong account or the wrong transaction
This error goes in two directions.
In the first, pre-tax money lands in a Roth IRA when you meant a traditional IRA. A hypothetical couple asks to roll an old 401(k) into a traditional IRA. A routine move that isn’t taxed. But the form carries the number of a Roth IRA they also own, and the money lands there. The statement balance goes up, nothing looks wrong, and later a Form 1099-R reports a taxable amount. Because conversions made in 2018 or later can’t be recharacterized, they now have income they didn’t plan.
In the second direction, Roth money lands in a traditional IRA. A designated Roth account in an employer plan, such as a Roth 401(k), can be rolled to a Roth IRA or another designated Roth account, but not to a traditional IRA. If the money goes to the wrong place, the account holds a transaction the rules don’t allow, which needs to be corrected, not simply filed away.
How to prevent it
- Confirm the type of each account from how the custodian has it set up, not only from the title on a statement. Ask the custodian to confirm in writing.
- Put your instructions in writing: the account types, the account numbers and the exact transaction. Follow any phone call with an email.
- After the money moves, verify where it landed. Check the confirmation, then check the forms when they arrive. On Form 1099-R, box 7 shows how the transaction was coded. For example, a direct rollover from a designated Roth account to a Roth IRA is reported with code H. On Form 5498, box 7 shows the type of IRA.
- Keep a note of who you spoke with, the date and what was said.
If it already happened
The IRS has addressed custodian mistakes in private letter rulings. In one published ruling, the IRS granted relief for Roth 401(k) money that a financial institution deposited into the wrong type of IRA, noting that the documentation was consistent with an institution error. In another, it denied relief because the documentation did not show that the institution’s error caused the missed deadline. A private letter ruling applies only to the taxpayer who requested it and can’t be cited by anyone else, and asking for one takes time and money. They don’t promise anything for your situation. They do show what helps: good records. Your CPA decides what to pursue.
Error 2: Contributing above the income limit
Here’s a hypothetical. A professional sets up an automatic monthly contribution to a Roth IRA when her income is below the limit. It’s convenient and she doesn’t think about it again. Over a few years, promotions and bonuses push her income past the limit, and the contributions keep leaving her checking account.
For 2026, the IRS says the ability to contribute to a Roth IRA phases out between $153,000 and $168,000 of modified adjusted gross income for a single filer, and between $242,000 and $252,000 for married couples filing jointly. The 2026 contribution limit is $7,500, or $8,600 if you are 50 or older. Those are 2026 figures. The IRS had not published 2027 figures as of this writing.
Contributions above what you’re allowed are excess contributions, and they carry a 6 percent excise tax. The part that surprises people is that the 6 percent applies for each year the excess remains in the account. It’s not a one-time penalty. It repeats.
How to correct it
- Withdraw the excess, with its earnings, by the due date of your tax return for that year, including extensions. The IRS then treats the contribution as if it had not been made. The earnings are taxable in the year of the contribution.
- Recharacterize the contribution, meaning move it, with its net income, to a traditional IRA by the same deadline. Your CPA can tell you what that does to the tax treatment.
- If the deadline has passed, the 6 percent tax is reported on Form 5329 for each year the excess remained. Fixing the problem as soon as you find it stops the tax from building.
One timing point. Under Internal Revenue Code section 6501(l)(4), added in 2022, the income tax return you file for the year can start the IRS’s time limit for assessing this tax, and for the excess contribution tax that period is six years. Treat that as background, not a plan. Whether it applies to a particular earlier year is a question for your CPA, and a time limit is no reason to leave a fixable problem alone.
A custodian accepting a contribution doesn’t mean the contribution was allowed. The custodian reports what was deposited on Form 5498, which is an information form and doesn’t check your eligibility. That check belongs to you and your CPA.
How to prevent it: check your Roth eligibility every year, and review any automatic contribution after a raise, a bonus or an equity event. If your income is above the limit, there are other ways to fund a Roth, such as the backdoor Roth route, which has rules of its own.
Error 3: Rollover timing and frequency
Two rules matter here.
- The 60-day rule. If you take a distribution from an IRA and want to roll it into another IRA, you generally have 60 days to complete it.
- The one-rollover-per-year rule. You can make only one IRA-to-IRA rollover in any 12-month period, and the limit applies across all of your IRAs, traditional, Roth and SIMPLE, as if they were one account.
A hypothetical shows how the second rule bites. Someone takes a check from a traditional IRA in March and deposits it into another IRA within 60 days. In October, she takes a distribution from a Roth IRA, intending to roll it to a different Roth IRA. But she has already used her one rollover for the 12 months. The second one isn’t a valid rollover, and an improper rollover can create an excess contribution, with the 6 percent tax that repeats each year.
What isn’t limited. Trustee-to-trustee transfers, where money moves directly between custodians, aren’t subject to the one-per-year limit. Neither are conversions from a traditional IRA to a Roth IRA.
Where the two rules differ on repairs. The IRS can waive the 60-day requirement. There are three ways to get a waiver: an automatic waiver, a self-certification and a private letter ruling. Revenue Procedure 2020-46 lets you certify to the receiving custodian that you missed the deadline for one of 12 listed reasons, such as a financial institution error, a postal error or serious illness. A self-certification isn’t a waiver by the IRS and doesn’t bind it. The one-rollover-per-year rule is different. IRS Publication 590-A states that the IRS can’t waive it.
How to prevent it: use trustee-to-trustee transfers when you move an IRA. A check you take possession of starts a 60-day clock and uses your one rollover. A direct transfer does neither. If you have a real reason to take a distribution and put it back, write down the date, count the days and tell your CPA.
Error 4: The inherited Roth account
A Roth IRA owner has no required minimum distributions during their lifetime. From that, people often conclude that a Roth account has no deadlines. That’s true for the owner. It isn’t true for heirs.
Here’s a hypothetical. A parent leaves a Roth IRA to two adult children, who assume they can leave it alone and let it grow. IRS Publication 590-B says that after a Roth IRA owner dies, the traditional IRA distribution rules apply as though the owner had died before their required beginning date. For adult children, that means the 10-year rule: no distribution is required in years one through nine, and the entire balance must be out by December 31 of the tenth year after the owner’s death. Anything left after that date is subject to a 25 percent excise tax, reduced to 10 percent if the shortfall is corrected within the window the law defines. The IRS can waive the tax for reasonable error when the person is taking steps to fix it, and you ask on Form 5329. Whether earnings come out free of income tax depends on the account’s five-year rule, which your CPA should check.
Who the beneficiary is changes everything:
- A surviving spouse has the most flexibility and can generally treat the Roth IRA as their own.
- An eligible designated beneficiary, such as someone disabled or chronically ill or someone not more than 10 years younger than the owner, can take life expectancy payments or elect the 10-year rule. Under the terms of most IRAs, life expectancy is the default unless the beneficiary elects the 10-year rule, and the election has a deadline.
- Other individuals, including adult children, are under the 10-year rule.
- An estate or other non-individual is under the 5-year rule, so the account must be emptied by December 31 of the fifth year after death.
That’s why the beneficiary form matters. If it’s blank or out of date, the custodian’s default terms decide who inherits, and depending on the agreement that can mean the estate. Writing “per my will” instead of naming people may not count as a designation, so check how your custodian treats that wording. Publication 590-B itself tells you to review the custodian’s documents for the specifics.
How to prevent it
- Name primary and contingent beneficiaries on every account.
- Read the custodian’s default provisions.
- Make sure the designations match your estate plan, and ask your attorney to confirm it.
- If you inherit a Roth account, work out which class you are in, and when your deadline is, before you do anything. If it’s inside an employer plan, read the plan’s rules, because plans can have their own election windows.
Error 5: Converting, or electing Roth, with no plan to pay the tax
A conversion adds the pre-tax amount to your income for the year. The IRS says you may need to raise your withholding or make estimated tax payments. And since 2018, you can’t change your mind: a conversion can’t be recharacterized to a traditional IRA. So the question to answer before you convert is how, and when, you’ll pay the tax. That’s a question for your CPA, because the answer depends on what you’ve already paid in.
Four details make this error easier to make.
1. Withholding from the conversion itself. If tax is withheld from an IRA distribution, that portion isn’t rolled into the Roth. The amount you keep is generally taxable, and if you’re under 59½ it may also be subject to the 10 percent additional tax. The default rate on the IRS withholding form for nonperiodic payments is 10 percent, so ask your custodian whether withholding will apply.
2. Required minimum distributions. If you must take an RMD this year, you can’t convert it. Treasury regulations treat the first dollars distributed from your IRA in a year as your required distribution until it has been satisfied. Take the RMD first, and convert after.
3. The calendar. A conversion by rollover is generally treated as made in the year the money leaves the traditional IRA, so a distribution taken in late December and rolled into the Roth in January is generally a conversion for the earlier year. Custodians also set their own year-end cutoffs, so ask early.
4. The employer Roth match. Under the SECURE 2.0 Act, a plan may allow you to designate employer matching or nonelective contributions as Roth. If you make that choice, the amount is included in your income for the year it’s allocated to your account, and it’s reported on Form 1099-R. IRS Notice 2024-2 says those contributions aren’t wages for withholding, so no income tax comes out of your paycheck for them, and it says you may need to raise your withholding or make estimated payments. The plan has to offer the choice, the contribution has to be fully vested, and the designation can’t be changed once the contribution is allocated. If your open enrollment includes this choice, treat it as a tax decision rather than a form to fill out.
One more caution. If anyone promises a way to move a large traditional IRA into a Roth with no tax and no reporting, take it to an attorney who handles retirement accounts first. A conversion is a taxable event.
A pre-conversion checklist
1. Confirm the account types you’re moving from and to, using custodian records and tax forms, not only the statement title.
2. Take your RMD first if one is due this year.
3. Use a trustee-to-trustee transfer unless you have a specific reason not to.
4. Put instructions in writing, confirm in writing and note the name, date and time of any call.
5. Decide how the tax will be paid, who will track estimated payments and whether any withholding applies.
6. Check your Roth contribution eligibility every year and review automatic contributions after raises, bonuses and equity events.
7. Check beneficiary forms on every account, primary and contingent, and confirm they match your estate plan.
8. Keep your records (below).
Records to keep
Keep these yourself, not only with your custodian, because custodians change and you may need to prove your basis years later: Form 5498 and Form 1099-R for each year, Form 8606 if you file one, account statements, and every written confirmation, including notes of phone calls.
Who owns each step
Retirement account rules are technical, and each professional on your team has a specialty. Your CPA owns the tax treatment, estimated payments and forms such as Form 5329. Your attorney owns beneficiary and estate documents. Your advisor can coordinate the transaction, the instructions and the timing. It helps to write down who owns each step before you convert.
Your next step
Pick the error closest to your situation and check it this week. Pull your latest Form 1099-R and Form 5498, confirm the account type and the code, and compare any automatic Roth contribution to the income limit. If you’d like to walk through your own plan, schedule a complimentary 15-minute introduction call using the button below. We’ll talk through where you stand and work alongside your CPA and attorney.
Lions Wealth Management Inc. (LWM) is a State of Minnesota Registered Investment Advisory firm helping individuals create retirement strategies using a variety of investment and insurance products to meet their needs and objectives. LWM may only transact advisory business in states where it is registered or exempt or excluded from registration. Content in this article is provided for information purposes only and should not be considered investment, tax, legal or insurance advice and should not be considered a solicitation to buy or sell any of the products mentioned. All examples are hypothetical and do not represent any client. Rules, limits and deadlines change; confirm current figures with the IRS and your CPA.
Works Cited
- IRS Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs)
- IRS Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs)
- Revenue Procedure 2020-46
- IRS Notice 2024-2 (SECURE 2.0 Act guidance, Section L)
- Instructions for Forms 1099-R and 5498
- Instructions for Form 8606 and Instructions for Form 5329
- Form W-4R
- Internal Revenue Code sections 408(d)(3), 4973, 4974 and 6501(l)(4)
- Treasury Regulation 1.408A-4
