Will they go to jail over IRA?

D

EAR HARRY:

I have been convinced for some time that tax rates will have to go up, even for those at middle-income levels.

As a result, I rolled over my IRA to a Roth IRA last December. I had to do a lot of soul-searching before I did it, because there was a stiff tax to pay.

I filed my return electronically, and it was accepted by the IRS. At this late date, I received a notice from my IRA custodian (a large mutual-fund company) that $394 was added to the value of my new IRA a few days after I made the rollover.

The guy who prepared my return told me to ignore it, but my wife is worried that we'll go to jail if the IRS pursues it.

Help!

WHAT HARRY SAYS: Tell your wife that her Uncle Harry says not to worry.

Even for large shortages and some outright frauds, the IRS rarely goes for imprisoning taxpayers.

Now let's get down to brass tacks. The item appears to be an addition to your Roth IRA for income earned. As such, it is not taxable ever.

You paid the tax due on the value of your IRA rollover when you filed your 1040.

Any subsequent income in your Roth is never taxable. Nor are withdrawals.

There were a great many rollovers to Roths in 2012 by people who believe as you do regarding future tax rates.

I think the probabilities are on your side.