Traditional to Roth Conversion in 2010
I have a client that converted $20,000 from a Traditional IRA to a Roth IRA in March of 2010. I understand that the T/P has the option to include the income in taxable income ratably over 2011 and 2012. Can the T/P include $10,000 in taxable income in 2010 and the remaining $10,000 in taxable income in 2011. This is what she wants to do.
Thank you in advance for your input.
Permalink Submitted by Alan Spross on Mon, 2010-04-05 18:01
No, that option is not available. Either the taxpayer defers 50% each to 2011 and 2012 or opts out of the deferral and reports all the conversion income in 2010.
The client could recharacterize half their conversion, leaving only 10,000 and then report it all in 2010. Then they could do additional conversions in 2011 and 2012 if they wanted to. Both the recharacterization deadline AND the deadline for opting out of the 2 year deferral is 10/17/2011.
There are many trade offs possible due to all this flexibility, but for small amounts they might want to avoid added complexity from recharacterizations, extensions of returns etc.