Roth IRA Conversion after 2010
If somebody does the conversion in 2010 and elects to defer to 2011 and 2012, what happens to any amounts that are converted in 2011? Are they just added to the person’s income for that tax year on top of the 50% that was deferred? I assume that’s the answer, but wanted to clarify.
Permalink Submitted by mk foss on Thu, 2009-12-03 19:05
The 2011 conversion is added to income just as the 50% of the 2010 conversion is. The new conversion should be put in a separate account (at least until October 15, 2012) to facilitate possible recharacterization.
Permalink Submitted by Alan Spross on Thu, 2009-12-03 19:31
For someone converting small incremental amounts every year within their current marginal bracket, it is simpler to just opt out of the two year deferral, and just convert your amount year by year as if the 2010 two year deferral did not exist.
Otherwise, you are losing the use of the 2010 marginal bracket, and making up for it by additional conversions in 2011 and 2012 could result in exposure to higher tax rates in those year for two reasons. First, the added amount of taxable income and second due to rate increases because of expiration of the Bush tax cuts. The expirations may not affect lower brackets much because of the 250,000 income limit Obama pledged to protect during the campaign, but could be a big problem for the higher brackets.
Permalink Submitted by Jeff Rose on Thu, 2009-12-03 20:17
Thank you both for your responses. I’ve been a frequent visitor to the forums, but first time I’ve asked a question. It’s reassuring knowing there are qualified experts to answer these questions. 😀