Roth Conversion – Tax
Does anyone know of a tax deferral option to pay 2010 Roth converted monies in 2010 and 2011?
I thought the only options were either claims as income in 2010, or defer to 2011 and 2012.
Any thoughts would be appreciated.
K
Does anyone know of a tax deferral option to pay 2010 Roth converted monies in 2010 and 2011?
I thought the only options were either claims as income in 2010, or defer to 2011 and 2012.
Any thoughts would be appreciated.
K
Permalink Submitted by Alan Spross on Mon, 2011-04-04 23:32
There are only two options:
1) Report all conversions of a taxpayer in 2010 with taxes due 4/18/2011. This is done by opting out of the two year deferral on line 19 of Form 8606
2) Default option to report 50% of conversion income in 2011 with taxes due by 4/15/2012 and 50% in 2012 with taxes due 4/15/2013.
Joint filers may make different decisions than their spouse re above.
If you want to report in 2010 and 2011, you must do a separate conversion in each year and opt out of the deferral on the 2010 conversion. If you already converted two years worth in 2010, you can recharacterize half of it and report the half that is left in 2010 and then do a new conversion after the waiting period in 2011. You might want to do that if 2012 was going to be a high income year compared to 2010 and 2011.
Permalink Submitted by Kirk Halveland on Tue, 2011-04-05 01:37
Thanks Allen.
Do you know of the tax or penalty consequences for attempting to claim 50/50 in 2010 and 2011?
K
Permalink Submitted by Alan Spross on Tue, 2011-04-05 02:56
The choice is made on line 19 of Form 8606. If the box is not checked the IRS would consider 2010 conversion income as an overpayment. If it IS checked, the IRS will expect ALL the conversion income to be reported for 2010 and if only half is reported the usual penalties for underpayment and/or failure to pay would apply.