Roth conversion US citizen working overseas
For the past 3 years, I have advised my single client, to fund a non – deductible IRA with the goal of converting to a Roth in 2010. Since her income has been well above the $100K AGI limit and she wanted to save aggressively for retirement, this made a lot of sense. However, due to a promotion she will be moving overseas (Hong Kong) and will be there for all of 2010 and will be paid in local currency. Can she still take advantage of the conversion opportunity next year and be able to defer paying the taxes into 2011 and 2012?
Permalink Submitted by Alan Spross on Mon, 2009-07-13 22:32
Sure, she is still a US citizen filing US taxes. Note that the foreign earned income exclusion could wipe out her ability to make a regular IRA contribution in 2010 if it equals or exceeds her income, but it does not affect her ability to convert.
If she defers the conversion income to 2011 and 2012, but her taxable income will increase in those years, she might also consider opting out of the 2 year deferral, converting somewhat less and reporting it all in 2010 if the foreign earned income exclusion will lower her marginal rate for 2010. Then she can still convert amounts in 2011 and 2012 according to her new circumstances. There are alot of planning variations here, and she can recharacterize all or part of her 2010 conversions by 10/15/2011 as well if needed.