IRA / Roth Conversions / QCD
Three questions re: IRAs and Roth conversions in 2010:
1 – If we do a conversion in 2010 and have half the income hit our 2011 and half hit our 2012 returns, when, if ever, can I recharacterize it back into the IRA? For example, if I convert money to a Roth during 2009, I have until my 2009 tax return due date, including extensions, to recharacterize, some or all of it, back into the IRA. Since this income or conversion won’t hit the returns until 2011 and 2012, do I have until those years’ return due dates or do I have to do it by the due date of 2010 return and hope I’m right about 2011 and 2012?
2 – Same example as 1 above, but this time instead of wanting to recharacterize, let’s assume I realize in 2011 that I could have converted MORE. Can I do a separate conversion for the same tax payer so that he has a conversion from 2010 hitting the 2011 return PLUS and additional conversion done in 2011?
3 – Have they finally announced they are going to allow RMDs to be given directly to a charity for 2010? Any years beyond?
Thanks in Advance.
Permalink Submitted by Alan Spross on Tue, 2010-06-22 00:12
1.) You have until 10/17/2011 to recharacterize all or part of a 2010 conversion, but by that time you will have a fairly good idea about your 2011 tax situation and tax rates for 2011. The same date is the deadline if you want to opt out of the two year deferral.
2) Yes, there are no limits on conversion amounts or the number of conversions. A 2011 conversion would be added to the taxable income deferred from 2010 unless the opt out decision was made on the deferral. If that was done, it becomes a year to year decision just as it was prior to 2010. There remains considerable flexibility to make these decisions retroactively using the extended due date deadline.
3) The QCD is still tied up in an extenders tax bill. Prospects still look favorable for this provision, but it probably will not be official until later. If you want to do a QCD PLUS a conversion, the order of these actions is critical because the first distribution is still deemed to include the RMD. This effectively delays the conversion until the QCD status is confirmed is you want the QCD to cover the RMD. You could gamble and do the QCD now and if the extension fails, you have a taxable RMD distribution and a contribution that could only be addressed on Sch A.