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Procedure to defer Roth conversion tax?

Any ideas on how the deferment of Roth conversion tax to skip a year and get divided in half will go? Early indications are that the account caretaker just threw a full IRA distribution declaration over the wall. And no doubt the IRS gets it, tacks on huge early distribution penalties, then puts out a warrant for your arrest while you wait for the 2011-2 taxation option. Thanks
Reply to
dumbstruck
Sorry, "account caretaker"? Not to be pedantic, but who are you referencing? Schwab is the custodian of an IRA for a client of mine. I just pulled the 1099-R for the Roth conversion transaction. The Box 7 distribution code is 2 - Early Distribution Exception Applies. It's up to TurboTax and me to fill her tax return out to correctly identify this as a Roth conversion, same as prior years, and this year declare the intent for how to tax it, all in '10 or 50/50 in '11/'12.
As it's a conversion, there's no penalty. Would you like to clarify who you think is doing what? Joe
Reply to
JoeTaxpayer
Bless you, I now see a 2. The code explanations on the back of my 1099-R are in tiny faint grey font (why?) and I must have misread it the first time. I couldn't remember the term custodian so I thought that substitute term would suffice.
I'm just antsy about that custodian, whom I left due to poor access to tax info like basis. They have a paperless approach, and have cut me off from online access to most of my records even though they advertised continuing online access after departure. I did try to snapshot many pdf's before I left, but...
Reply to
dumbstruck
Thanks for your kind words. Often, there's some adviser in addition to the custodian.
Back to the real point - as you do your taxes, look at your "taxable income" to get a feel of your marginal rate. If taking it all in 2010 puts you over the current bracket, I'd split over the two years. If even half puts you over, I'd consider recharacterizing.
I fear there are many who fell into the mania and coverted their way right into the 25% rate (from 15%). Be well, Joe
Reply to
JoeTaxpayer
Joe:
I'm one of those who converted right into a higher tax bracket, and I don't think I've made a mistake.
My concern about how our country is going to get out of its financial crisis causes me to want to minimize my tax bill for the future. If I don't get out of IRAs soon, I may be facing tax rates WELL ABOVE 15%, 25%, or more on my forced RMDs (I'm age 77).
My last IRA->Roth was in January, 2010. It's been a painful 5-10 years in which I've been moving my IRAs to Roths, but now that that is done I feel relieved. I wouldn't dream of recharacterizing myself out of that feeling.
Reply to
Gary
There is another consideration for state tax filers who try to defer/ split. Some states won't, and will nail you for the deferred conversion amount which may be a huge number with various implications. I guess 2 half conversions may have been best.
Reply to
dumbstruck

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