2010 Roth conversion confusion
If I take the 2 year option (conversion split between tax years 2011 and 2012) does that mean I can’t make additional conversions applicable to tax year 2010? Also, does that mean that I can’t make any additional conversions for tax years 2011 and 2012 beyond that made in 2010? If not, it seems that I am compressing potentially 3 years’ conversions into 2 years.
Thanks for any clarification
Permalink Submitted by Alan Spross on Fri, 2009-12-11 23:43
You have the compression problem figured correctly. You can choose to have all your 2010 conversions deferred for the two years OR you can opt out and report the conversions in 2010, but there is no combination allowed. While you can do additional conversions in 2011 and 2012 if you wish, that conversion income will be added to the deferred share of the 2010 conversions. You would lose the ability to use your 2010 marginal bracket and all income would be bunched into 2011 and 2012.
There is more flexibility for married couples if both have plans to convert. One spouse can defer and the other can report their conversion in 2010, thereby getting some use from the 2010 bracket.
For someone who is doing incremental conversions over a period of years to stay within a given tax bracket, they should opt out of the deferral and simply convert the amount they wish each year.
Permalink Submitted by William Wade on Sun, 2009-12-13 20:41
Thank you for staying up late to provide such a timely and comprehensive answer!
Permalink Submitted by Al Fry on Mon, 2009-12-14 20:04
Only 20:07 in Prescott!
Permalink Submitted by Alan Spross on Tue, 2009-12-15 00:39
Al,
And sometimes I stay up even later than that!!