Taxes for Roth conversion done in 2010
I’m planning on doing a conversion in 2010 and trying to understand the potential tax options.
I’m asware that you can split the taxable value of the converion and declare it as income in your 2011 and 2012 tax years.
What I’m wondering is this an all or nothing option. For example can I take 20% of the converted amout and declare it in my 2010 tax year and then split the remaining 80% in 2011 and 2012?
Also if I decide to defer a portion into 2011 and 2012 does it have to be an even split or could I elect to do something like 70% in 2011 and 30% in 2012.
Thanks for any responses.
Permalink Submitted by Alan Spross on Mon, 2009-08-24 21:13
It IS an all or nothing situation. The default provision (if you do nothing), will be to report half the income in 2011 and half in 2012. You also have the option to opt out of the deferral and simply report the entire amount in 2010 if you wish. This is the only way that your 2010 bracket will be applied to conversion dollars.
Other options you DO have:
1) Can delay the final decision to the same date as the recharacterization deadline, ie 10/15/2011.
2) You can still recharacterize all or any part of any conversion, but the remaining amount must either be split or totally reported in 2010.
3) If you do multiple conversions, the same deferral decision must apply to all
4) Since IRAs are individual, a spouse can make a different deferral decision than the taxpayer, and that provides further planning options.