A conversion moves money into a Roth IRA; a withdrawal pays money out
A Roth conversion generally moves eligible funds from a traditional IRA into a Roth IRA. A withdrawal is a distribution made available to spend or otherwise use outside the retirement account. The distinction should be clear on the transaction request and the receiving account instructions before money moves.
A conversion can be completed by a direct trustee-to-trustee movement or by a rollover completed under the applicable rules. A payment retained by the account owner is not converted simply because another portion reaches a Roth IRA.
A conversion can create current taxable income without creating cash for expenses
The IRS explains that the amount from a traditional IRA that would have been taxable if it had not been converted is generally included in gross income for the conversion year. The converted amount remains in the Roth IRA; it is not a cash payment available for current spending.
A traditional IRA may contain nondeductible basis. Prior Forms 8606 and contribution records can affect the taxable analysis. A current balance alone does not show every fact needed for the return.
The year of the transaction can change the review
A conversion is reported for the tax year in which it occurs. Its effect should be considered alongside other income, deductions, credits, estimated tax, withholding, and planned transactions for that year. The date on which a payment is requested and the date the account processes it can matter.
Required minimum distributions cannot be converted. If a distribution rule, basis issue, or year-end timing is involved, obtain current custodian information before submitting the conversion instruction.
Keep the conversion record distinct from a cash-distribution record
Save the source account statement, receiving Roth IRA confirmation, distribution and rollover forms, Forms 1099-R and 5498, and prior Forms 8606. Those records identify the transaction when the tax return is prepared and when a later Roth IRA withdrawal is reviewed.