What year’s tax table will determine tax?
I am aware that for conversions done in 2010 that the taxes can be spread ratably over 2 years and included in income for 2011 and 2012. Will the amounts included in 2011 tax be subject to the 2011 tax table that we do not know what it is yet? And further the amounts in 2012 be according to the yet to be determined 2012 tax table?
thx
Permalink Submitted by Alan Spross on Wed, 2009-10-21 20:00
Yes, the tax rates that apply will be those for the year in which the income is reported.
Of course, if there is a large rate increase in 2011, you would know by the recharacterization deadline of 10/17/2011 because an increase would not be retroactive by that many months. 2012 would be more of a guess and you would have to assess the political climate near the recharacterization deadline. Up to 10/17/2011, you can either recharacterize all or parts of the 2010 conversion OR opt out of the two year deferral and report the entire conversion in 2010. I can see some people doing both, ie reducing the conversion by a partial recharacterization, and then reporting all of it in 2010 to avoid a tax rate increase.
That’s why there is no real reason to hold back in 2010, since you can reverse any conversions that you do for any reason you want.