How to Rollover a SIMPLE IRA to a Roth IRA
A SIMPLE IRA is a type of IRA commonly used by small businesses. If you change employers you may wish to convert your SIMPLE IRA to a Roth IRA. The SIMPLE IRA uses pre-tax contributions that allow you to defer income tax on all of your retirement savings until your retire. The Roth IRA, on the other hand, allows you to receive untaxed retirement income provided you forgo the tax exemption on the contributions. It's easy to convert your SIMPLE IRA to a Roth IRA.
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Instructions
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Contact the broker who holds your SIMPLE IRA.
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Obtain the forms necessary for the transfer. You will need a transfer request form from the brokerage where your Roth IRA will be held. You will also need to obtain a 1035 exchange form if your SIMPLE IRA uses an annuity to credit interest to the account and you want to purchase a new annuity in the Roth IRA.
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Complete the paperwork and submit it to the brokerage that will be the custodian of the Roth IRA. You will need to pay income tax on the money that is transferred into the Roth IRA because the SIMPLE IRA holds pre-tax funds while the Roth IRA uses after-tax contributions. The tax will be due in the year that you make the transfer and is reportable on your tax return.
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References
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