2010 Roth Conversion – Deadline
Hello. I delivered the paperwork for the 2010 conversion (IRA to Roth) to my advisor for three accounts on December 22nd. Two of them were converted on the 23rd and the third one was not converted until today. As such, is the “official IRS Date” of the Roth conversion the date I signed the papers (22.Dec.10) or today? If the “official” date is today (3.Jan.11) then it is too late for the 2010 Roth conversion and it will have to be transferred back. How should this be done so that I incur no costs, penalties, fees, etc.? Thank you very much for your help.
Permalink Submitted by mk foss on Mon, 2011-01-03 18:50
My understanding is that the Roth conversion must be “in process” at 12/31 – it sounds like it was in process for you.
Permalink Submitted by Alan Spross on Mon, 2011-01-03 21:28
A conversion is a two step process, first a distribution and then a contribution to the Roth. The distribution portion must be recorded on the books of your IRA custodian in order for the 1099R to show a 2010 distribution and therefore a 2010 conversion. You should be able to get confirmation whether this was completed on their books by 12/31 or not without further delay. If it was not, you have 21 months to decide whether to recharacterize it or not, so I would not rush into a recharacterization right now even if it turned out that one of these was not completed in 2010.
Granted, if one did not get completed it would upset your taxable income plan, since the 2010 conversions would probably be reported 50% in 2011 and the one that was done in 2011 would be added to the 2011 taxable income figure. But you have plenty of time to figure out the best approach to take from here.
Permalink Submitted by P Andre on Mon, 2011-01-03 23:42
Thank you both for the help and information as I feel less stressed-out. I will ask my Advisor to find out the date of the distribution.