2010 Roth Conversion Strategy
Now that the MAGI lid is off Roth conversions, I’m thinking of doing a conversion, but thought I’d double check my logic here first 😯
This month I plan on opening 3 new Roth IRAs with Fidelity and doing a $100,000 Roth conversion.
$40,000 will go into one new Roth, invested in, say, a Large Cap Value ETF
$40,000 will go into the second new Roth, invested in a Bond ETF
$20,000 will go into an International ETF
I take the 2 year income election (2011 and 2012)
Am I correct that I have until Oct 15, 2011 to recharacterize any of the above 3 Roth IRAs, which I would want to do if the value of any of them dropped below the original conversion amount it received…even though I’d already filed my 2010 tax return by 4/15 2011?
And if I did recharacterize, I would not have to file an ammended return, as I have not yet had to include the income?
Is my thinking correct?
Thanks for any feedback
BruceM
Permalink Submitted by Alan Spross on Wed, 2010-01-13 02:02
Bruce,
Yes, you have until the extended due date to recharacterize all or part of any of the conversions, and that is also the final date to determine whether you will go with the deferral or opt out.
However, if you file in April, although the IRS has not released reporting mechanics yet, you may have to file a stand alone amended 8606 and explanatory statement on any recharacterization just to report the reduced conversion regardless of when you will report the income.
Again, this is just a guess without benefit of any IRS releases on any of the details as yet. They may want to keep track of developments each year despite no taxes due for 2010. There are going to be plenty of recharacterizations occurring, and if Congress jacks up tax rates in 2011 there will be some opting out of the two year deferral as well, particularly for the higher brackets which will take the hit.
Permalink Submitted by BruceM on Wed, 2010-01-13 19:17
Alan
As usual, thanks much.
And I will keep my eyes open for IRS released rules on the mechanics of this filing
BruceM