roth conversion
I was listening to a webinar the other day and there was a lady speaking on Ira’s and Roth conversions and she said that if you did the roth conversion in 2008 you would have 2 yrs to pay the tax on it…Is this correct because I thought it has to be paid at once
Permalink Submitted by Alan Spross on Mon, 2008-12-22 04:12
You might have heard her wrong. The 2 year tax payment is for conversions done in 2010 ONLY. Half the income is reported in 2011 and the other half in 2012. This is the default rule for 2010 conversions although you can opt out of it and report the entire conversion in 2010.
For other years, the taxes are due the following April, and in addition a conversion could trigger an underpayment penalty if you do not cover the taxes with withholding and/or quarterly estimates. The only previous time there was an offer to defer taxes on conversions was in 1998 when the Roth was first introduced.