Just wondering, A unique situation might make it more advantageous for me to take ALL of my 2010 Roth IRA Conversation income in 2011, rather than the "deal" of splitting it over 2011 and 2012. Is this an option? Or MUST I split it over 2011 and 2012 (for a conversion done in 2010)?
You can do one or the other, as you choose.
Based on the wording in the Act and the JCT summary, I don't believe this is an option. You only have two options: Take it all in 2010 or take 50% in 2011 and 2012. There is no option to take 100% in 2011.
Right. I misread the year. Thanks for the correction.
The question has been answered, but my commentary is that it seems odd that the rules would prevent the recognition of more than half of the conversion income in 2011, instead of half each year, if the taxpayer so chose. Accelerated recognition of the income accelerates the taxation, which one would think serves the interest of collecting taxes sooner. Alright, I know it's too much to ask taxes to all make sense.
It makes for a simple tax world. If you look at Part II of Form 8606, the taxpayer has to make an election. Check a box to be taxed in 2010 or enter the dollar amount (50%) for 2011 and again for 2012. In this manner, the IRS knows what to look for on a tax return in 2010, 2011 &
2012 as represented by the 1099-R (Code 2 or 7 in Box 7) received by the taxpayer. This method also eliminates any 2011/2012 "gaming" by the taxpayer who elects to defer to 2011 and 2012. I would not be surprised if every taxpayer who defers, gets a letter from the IRS before the 2011 tax season that reminds the t/p about the 50% tax hit. I've been told that each t/p who took the 2008 first time homebuyer credit is getting a letter reminding them that the first 1/15th of the credit (typically $500) has to be entered on the 2010 Form 5405. I haven't actually seen one of these letters.
If you recall, a similar thing took effect when the Roth was first introduced, only the choice was all at once or a 5 year deferral, the first year being the actual year the conversion was made. '98, maybe? Joe
There's nothing prohibiting you from overpaying your 2011 taxes, and electing to have the overage used towards your 2012 taxes.
True, but that would not change the deferred conversion income for
2011 and 2012. That is what is fixed, so one is prevented from doing "income management", after the fact of taking the deferral option. The option of doing partial conversions year by year with the option to recharacterize retains that flexibility, as the other alternative.BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.