2010 & Roth IRA conversion?

From H.R.4297 (Otherwise known as TIPRA - Tax Increase Prevention and Reconciliation Act of 2005);

"unless the taxpayer elects not to have this clause apply, any amount required to be included in gross income for any taxable year beginning in 2010 by reason of this paragraph shall be so included ratably over the 2-taxable-year period beginning with the first taxable year beginning in 2011.'."

So - your interpretation is correct, the 2010 conversion is included as income on returns for 2011 and 2012, if you choose.

Two comments for you - If there is any post-tax money in the IRAs, you may not separate it out, you must convert in the same proportion as the IRAs contain. e.g. if the accounts total $100K, and $20K is post tax money, 80% of the money converted is taxable. Also, I always suggest folk look at

to understand their current tax bracket. Depending what your motivation is for converting, you want to be aware that a conversion may push you into the next tax rate, which, in general, should be avoided.Joe

.... Which are filed in 2012 and 2013, right? (For most taxpayers.)

Okay, thanks for the citation. Just curious: why would Congress allow us to defer the taxable income one year?

I know: in matters of tax law, never ask "why?". But perhaps HR 4297 provides some insight that you can share.

Yes, 2011 return has a normal due date of 4/15/12

Well, if you choose to do it, it's half one year, half two years. When Roth IRAs were first allowed, there was a chance to claim 1/4 each year for 4 years.

my bad - I meant to provide a link for those interested in reading that section.

Joe

Laws don't generally include the rationale.

I think this was just one of Bush's tax cuts.

Thanks to a friend on Congressional budget committee staff I know the answer to this one. It is obvious if you look at the table of budget projections for the bill in question. They needed a huge spike in projected revenue in

2012 and 2013 to squeeze the bill through budget rules. It just about jumps off the page at you.

The provision has an interesting provenance. If you look at the final pre-conference versions of the bill passed by the House and the Senate you'll find the Roth 2010 provisions in neither. They sprang fully formed from the Conference Committee's forehead.

The provision is a budget buster in what were then the out years for projections. That's why I keep saying don't bet on its still being law in

2010.

When they codified, true.

But __bills__ usually do provide a good deal of justification and other related information. Moreover, before they are codified, enacted law is reported as Public Law, which often has the justification intact.