2009 trad IRA contribution -> Roth

Apr 04, 2010 2 Replies
S

I'm thinking it may be a good idea to make a 2009 contribution to either a deductable or nondeductable traditional IRA and then immediately convert to a ROTH this week (assuming not elligible to make a ROTH contribution due to AGI). Is there any reason why that wouldn't be a good idea? We file MFJ and are not participating in a pension program. All earned income is 1099 -> sked C.



I guess if it was non-deductable the only impact would be any gain between making the contribution and converting would be taxable in



2010-2011 and if deductable then the tax on the deducted amount would essentially be deferred to 2010-2011?

Any gotchas that come easily to mind?



scott s. ..


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P

Several, which you may or may not already be aware of. Instead of our rewriting stuff that's already available and doing a lot of OTOH's, how's about you look at the rules in IRS Publications 560 and 590, use Form 8606, Part I to figure out the taxable income from the conversion (you can do it without any earnings having accrued on your 2009 contribution), and then tell us what you plan to do? And if you bump into something you don't understand, please be specific.

Phil Marti VITA/TCE Volunteer

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J

traditional IRA and then immediately

I'm curious what leads you to that conclusion. With no pension, are you saving such a high percent of your income that you're likely to be in a higher bracket at retirement? Without knowing more about your situation one can't tell if you're planning to do the right thing.

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