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Posted by curiousgeorge408 on June 29, 2008, 10:12 am
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Normally, if I convert funds in an Trad IRA to a Roth IRA
in 2008, for example, am I correct that that amount is
included in __2008__ taxable income?
But I've read in two places that funds converted in 2010
can be reported "as taxable income in __2011__ and
__2012__", and (I infer) none is reported as taxable
income in 2010.
Is that right?(!) Or do they really mean that is reported
as taxable income on returns __filed__ in 2011 and 2012
-- that is, the tax years 2010 and 2011?
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Posted by joetaxpayer on June 29, 2008, 10:35 am
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curiousgeorge408@hotmail.com wrote:
> Normally, if I convert funds in an Trad IRA to a Roth IRA
> in 2008, for example, am I correct that that amount is
> included in __2008__ taxable income?
>
> But I've read in two places that funds converted in 2010
> can be reported "as taxable income in __2011__ and
> __2012__", and (I infer) none is reported as taxable
> income in 2010.
>
> Is that right?(!) Or do they really mean that is reported
> as taxable income on returns __filed__ in 2011 and 2012
> -- that is, the tax years 2010 and 2011?
From H.R.4297 (Otherwise known as TIPRA - Tax Increase Prevention and
Reconciliation Act of 2005);
"unless the taxpayer elects not to have this clause apply, any amount
required to be included in gross income for any taxable year beginning
in 2010 by reason of this paragraph shall be so included ratably over
the 2-taxable-year period beginning with the first taxable year
beginning in 2011.'."
So - your interpretation is correct, the 2010 conversion is included as
income on returns for 2011 and 2012, if you choose.
Two comments for you - If there is any post-tax money in the IRAs, you
may not separate it out, you must convert in the same proportion as the
IRAs contain. e.g. if the accounts total $100K, and $20K is post tax
money, 80% of the money converted is taxable. Also, I always suggest
folk look at http://www.fairmark.com/refrence/index.htm to understand
their current tax bracket. Depending what your motivation is for
converting, you want to be aware that a conversion may push you into the
next tax rate, which, in general, should be avoided.
Joe
www.blog.joetaxpayer.com
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by curiousgeorge408 on June 29, 2008, 10:01 pm
Please log in for more thread options > From H.R.4297 (Otherwise known as TIPRA - Tax Increase Prevention and
> Reconciliation Act of 2005);
> "unless the taxpayer elects not to have this clause apply, any amount
> required to be included in gross income for any taxable year beginning
> in 2010 by reason of this paragraph shall be so included ratably over
> the 2-taxable-year period beginning with the first taxable year
> beginning in 2011.'."
>
> So - your interpretation is correct, the 2010 conversion is included as
> income on returns for 2011 and 2012, if you choose.
.... Which are filed in 2012 and 2013, right? (For most taxpayers.)
Okay, thanks for the citation. Just curious: why would Congress
allow us to defer the taxable income one year?
I know: in matters of tax law, never ask "why?". But perhaps
HR 4297 provides some insight that you can share.
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by joetaxpayer on June 29, 2008, 10:45 pm
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curiousgeorge408@hotmail.com wrote:
> .... Which are filed in 2012 and 2013, right? (For most taxpayers.)
Yes, 2011 return has a normal due date of 4/15/12
> Okay, thanks for the citation. Just curious: why would Congress
> allow us to defer the taxable income one year?
Well, if you choose to do it, it's half one year, half two years. When
Roth IRAs were first allowed, there was a chance to claim 1/4 each year
for 4 years.
> I know: in matters of tax law, never ask "why?". But perhaps
> HR 4297 provides some insight that you can share.
my bad - I meant to provide a link for those interested in reading that
section. http://www.rothira.com/conversions.htm
Joe
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by Barry Margolin on June 29, 2008, 11:12 pm
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> curiousgeorge408@hotmail.com wrote:
>
> > .... Which are filed in 2012 and 2013, right? (For most taxpayers.)
>
> Yes, 2011 return has a normal due date of 4/15/12
>
> > Okay, thanks for the citation. Just curious: why would Congress
> > allow us to defer the taxable income one year?
>
> Well, if you choose to do it, it's half one year, half two years. When
> Roth IRAs were first allowed, there was a chance to claim 1/4 each year
> for 4 years.
>
> > I know: in matters of tax law, never ask "why?". But perhaps
> > HR 4297 provides some insight that you can share.
>
> my bad - I meant to provide a link for those interested in reading that
> section. http://www.rothira.com/conversions.htm
Laws don't generally include the rationale.
I think this was just one of Bush's tax cuts.
--
Barry Margolin, barmar@alum.mit.edu
Arlington, MA
*** PLEASE don't copy me on replies, I'll read them in the group ***
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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