IRS code for Roth Conversions
Good Afternoon:
My firm’s clients have shown significant interest in converting to Roth IRAs, but so far I have been unable to get the IRS code sections that apply to the conversion math. So far, I have been using form 8606 as my guide when performing the initial calculations to give clients numbers to consider. I found a great article, “2010 Traditional IRA to Roth IRA Conversion Tax Rules ” on GoodFinancialCents.com, which provided excellent examples for conversions. However, in order to confirm that these calculations are correct, I would prefer some substantive evidence. Can anyone direct me to a current IRS publication or code section that details the new Roth conversion rules. Specifically, whether a taxpayer has to take a distribution from a regular 401K, roll that into an IRA, and then convert to a Roth?
Permalink Submitted by Marvin Rotenberg on Wed, 2010-01-20 18:26
The Pension Protection Act of 2006 signed into law on August 17,2006 states that beginning in 2008 company plan funds can be converted directly to a Roth IRA. Eliminating having to go to a traditional IRA fist.
The Tax Increase Prevention and Reconciliation Act of 2006(TIPRA) removed all restrictions for converting to a Roth IRA. Everyone that qualifies, and that includes plan beneficiaries who, beginning in 2010, will be able to convert that inherited company plan balance to an inherited Roth IRA. TIPRA 2006 allows anyone who converts in 2010, to pay no tax in 2010 and then include half the conversion income in 2011 and the remaining half in 2012. They also have the option to pay the tax in full in 2010.
Marvin