2010 traditional to roth ira conversion

Earliest: 1 January 2010 Deadline: 31 December 2010

Yes.

Under *current law* you can do it in 2010 and any year thereafter.

-- Rich Carreiro snipped-for-privacy@rlcarr.com

Wouldn't it be simpler to just do the Roth conversion directly?

If you made both deductible and non-deductible contributions to your traditional IRA's, then the calculation of tax due upon conversion gets more complicated.

Sorry, typo, I meant Roth *contribution* directly.

I recall that the removal of AGI-based limits only applies to conversions, not contributions. So he still cannot make a direct contribution to a Roth if AGI too high. This approach (Trad. Roth non-deductible contribution -> Roth conversion) is the only way to do it.

-Mark Bole

Pretty silly. So Congress is has effectively removed the AGI limit on Roth contributions for the year, but you have to do extra paperwork to take advantage of it.

And pay extra tax.

Lets say you have $100,000 of completely pre-tax trad IRA money. You now make a $5,000 non-deductible trad IRA contribution and then do a $5,000 trad->Roth conversion.

You will find via Form 8606 that $5000 * ($100,000/$105,000) = $4,762 of the conversion is taxable.

In other words, if your AGI if you had done nothing is I, then your AGI when doing a $5,000 non-ded trad IRA contribution followed by a $5,000 conversion would be I+$4,762 which will result in extra tax relative to doing nothing.

Now, if you're able to make a DEDUCTIBLE trad IRA contribution, there's no extra tax because while the conversion will now be entirely taxable -- $5,000 of extra income, the deduction for the contribution will offset it.

However, currently-employed people who are trying to use this approach to make a Roth IRA "contribution" are likely unable to make deductible trad contributions because they are probably in a qualified plan at work and will have a too-high AGI to be able to deduct a trad IRA contribution (if their AGI was low enough to deduct the trad contribution despite being in a qualified plan, their AGI is likely low enough to just make a direct Roth IRA contribution).

-- Rich Carreiro snipped-for-privacy@rlcarr.com

In article , snipped-for-privacy@alum.mit.edu (Barry Margolin) writes: | In article ,

| > I recall that the removal of AGI-based limits only applies to | > conversions, not contributions. So he still cannot make a direct | > contribution to a Roth if AGI too high. This approach (Trad. Roth | > non-deductible contribution -> Roth conversion) is the only way to do it. | | Pretty silly. So Congress is has effectively removed the AGI limit on | Roth contributions for the year, but you have to do extra paperwork to | take advantage of it.

With the conversion your money is tied up for five years if you want to avoid a penalty where with the contribution it would not be.

Dan Lanciani ddl@danlan.*com

Which is practically January 4, as usually no one is open on the holiday or weekend.

However, ONLY 2010 has the two-year-deferred spread (into 2011 and 2012).

That's the Paperwork Reduction Act at work! ;-)

Is the deferred tax payment spread into 2011 and 2012 mandatory, or can you take 1/3 in 1010, 1/3 in 2011, and 1/3 in 2012 ??

The 2011/2012 split is the default. You can elect to include it all in 2010 if you do so by the extended due date of your 2010 return. No other choices are available.

A quibble note. It's not the tax that's split, it's the income. That means that the tax will depend on what rates are in effect during the year(s) the income is recognized.

Phil Marti Clarksburg, MD

All in 2010 or 50% each in 2011 and 2012.

And if filing jointly and each spouse converts, each spouse can make either election regardless of what election is made by the other.

Are there special forms that will have to be used??

IRS has not announced the specifics yet, but somehow it will have to be reported.