Adjusted gross income for roths in 2009
On line 15b of the 1040 tax return has a roth conversion of $25000 which gives them an adjusted gross income on line 37 over $100000. This is including the roth conversion to bring it over. Is there another way that we should be reporting the roth conversion so that it does not give them an additional 6% tax? Can someone please advise.
Permalink Submitted by Alan Spross on Fri, 2010-03-12 02:20
The line 15b conversion amount does NOT count toward the modified AGI limit to convert of 100,000. Essentially, not counting the conversion itself is one of the modifications to AGI that produces modified AGI. Therefore, if you reduce the line 37 amount by 25,000 and the result is under 100,000 you “might” be OK.
However, note that there are some ADDITIONS to AGI that also determine modified AGI. Certain adjustments to income on the 1040 must be added to AGI, so you just need to determine exactly that modified AGI is under 100,000. What is of concern here is that tax software recognizes all the adjustment and if the result is over 100,000, then the conversion needs to be recharacterized. If the program is charging the 6% excise tax, that is a bad sign.
A complete definition of modified AGI is on p 58 of Pub 590.
Permalink Submitted by Anonymous (not verified) on Fri, 2010-03-12 02:26
“Modified” Adjusted Gross Income is used for conversion purposes – that excludes conversion amounts. So, I think you really don’t need to worry about anything. MAGI does not appear on any line of the 1040 as far as I remember.
I don’t see how a 6% penalty is generated at this point. Are you using a computer program?
pko
Permalink Submitted by Jean Dorrell on Fri, 2010-03-12 14:13
I am using ProSeries for a tax program. I am going to pull out my pub 590 and check out what it says.