Converting 2010 traditional contribution to Roth
Is it permissible to make a 2010 contribution to a tradtional IRA and then convert the traditional IRA to a Roth?
Is it permissible to make a 2010 contribution to a tradtional IRA and then convert the traditional IRA to a Roth?
Permalink Submitted by Jose Morales on Mon, 2010-01-04 16:50
Why not just make a Roth IRA contribution? Are you not elligible to make a Roth contribution and using this as a way around the eligibility requirements?
Permalink Submitted by James E. Pearman Jr on Mon, 2010-01-04 19:16
Client would not qualify to make Roth contribution due to income limits but would qualify for the Roth conversion.
Permalink Submitted by Alan Spross on Mon, 2010-01-04 19:41
The non deductible TIRA contribution can be made and then a conversion can be done in any amount the client wishes to pay taxes on. However, the client cannot just convert the after tax amount. The after tax basis per Form 8606 for all traditional, SEP or SIMPLE IRA accounts as a percentage of the total account balances determines the taxable amount of a conversion. Therefore, if the client has these other IRA balances, the conversion will be mostly taxable.
If the client has no other IRAs, they could make the contribution and then immediately do a tax free conversion.