401K to Roth in 2010
If an employee has a termination event in 2010 and converts a 401K to a Roth IRA can the tax be spread over 2011 and 20012? Also can this same employee re characterize the Roth to a traditional IRA if the value of the Roth drops in value?
Permalink Submitted by Alan Spross on Thu, 2010-02-11 17:29
Yes, a direct Roth conversion from a QRP can be reported in 2011 and 2012 in the same manner as an TIRA conversion to a Roth IRA. The same recharacterization deadlines apply, ie 10/17/2011 for a 2010 conversion. That is also the deadline for final election to defer the income or to opt out and report all income in 2010.
The recharacterization of a direct Roth conversion must be made into a TIRA account since it cannot be transferred back into the QRP. This means that if the QRP included after tax contributions in the conversion, an 8606 would be needed to reflect the added basis in the TIRA.