IRA Conversions
Updated over a week ago

What is a Roth IRA conversion?

A Roth IRA conversion, also known as a “backdoor conversion”, is when a Traditional IRA or pre-tax employer sponsored retirement plan, is converted to a Roth IRA.

Once the conversion is complete, converted funds will be placed in your Roth IRA and your earnings and contributions will now grow on a tax-free basis.

Why would I request a conversion?

If the advantages of a Roth IRA outweigh the advantages of owning a pre-tax account, a conversion may be worth considering.

If you aren’t eligible to contribute directly to a Roth IRA due to income limits, a conversion provides a way to add post-tax assets to your investment portfolio.

Owning a Roth IRA in addition to pre-tax accounts may improve your tax diversification to an investment portfolio.

M1 and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. It is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal, and accounting advisors to see if a conversion is right for you.

Tax considerations and reporting

The taxable amount of any converted funds must be added to your gross income when filing taxes for the year that the conversion was completed in.

You’ll receive the following tax forms following a conversion:

  • Form 1099-R: Delivered in January, this will report the converted amount from your pre-tax account.

  • Form 5498: Delivered in May, this will report the converted amount that was deposited into your Roth IRA.

Please note that tax documents will be delivered in the calendar year following the completion of a conversion since the converted amount is taxable in the calendar year in which the conversion was completed. For example, a conversion that is completed on January 3 will not receive a 1099-R until the following January.

Converting pre-tax assets to a Roth IRA is irreversible and the converted funds cannot be recharacterized to a pre-tax account at a later date.

Processing time

Once your request is submitted to our clearing firm for processing, it can take up to three business days to complete. Your delivering account will be paused for the duration of the conversion process and trading will be resumed once the conversion has completed.

Due to the high volume of requests received toward the end of the calendar year, we expect a longer processing time for requests submitted after December 15. Please submit your conversion request promptly to allow for any end-of-year delays that may occur. As a reminder, any conversions that are not processed by December 31 will not be reported on tax documents for the current tax year.

Please note that new deposits into a pre-tax IRA accounts are subject to a six-business day holding period before being converted to a Roth IRA. This is in accordance with M1 and Apex Clearing’s policies. This means that anew IRA deposit cannot be converted until the six-business day holding period has surpassed.

Are there any fees?

There are no fees charged when converting your M1 IRA to another M1 IRA. M1’s IRA termination fee does not apply to conversions.

Submitting a conversion request

You can request a conversion of your M1 Traditional or SEP IRA right from our Client Center.

Simply log in and click “Help” in the lower left corner on Web or tap "Client Support" on Mobile before selecting “Ask a question” to start a new conversation. From the options provided, select "M1 Invest" and then “IRA Conversion” before answering the questions that follow.

Please note that prior to submitting a request, the following is required:

  • An open, funded M1Traditional or SEP IRA

  • An open M1 Roth IRA

  • If converting cash: cash must be available and settled in your account before it can be converted

  • If converting securities: any recent trades must be settled before your holdings can be converted

For full conversions with securities, we may request a dividend sweep into the receiving account from our clearing firm on a quarterly basis. If you would like the dividends to be swept sooner, please reach out to our Client Success team and request the dividends be swept. A dividend sweep will not be requested for a partial conversion.

M1 is unable to advise if an IRA conversion is right for you. Please consult a qualified financial professional with any questions you have about additional tax implications or filing your taxes. We recommend speaking with a qualified financial professional before requesting an IRA conversion.

Brokerage accounts on the M1 platform are either fully disclosed to APEX Clearing or cleared through M1 Finance LLC. Please look at your account statement to determine how your account is cleared.

All investing involves risk, including the risk of losing the money you invest. Past performance does not guarantee future performance. Using margin can add to these risks. Users utilizing APEX cleared margin accounts should review the APEX margin account risk disclosure before borrowing. Users utilizing M1 cleared margin accounts should review the M1 margin account risk disclosure before borrowing. M1 Margin Loans are available on margin accounts with at least $2,000 invested per account. Not available for Retirement or Custodial accounts. Margin rates may vary.

Brokerage products and services are offered by M1 Finance LLC, Member FINRA / SIPC, and a wholly owned subsidiary of M1 Holdings, Inc.


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