Posts Tagged ‘Roth conversion’

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What’s New in IRAs? Not Much

January 3, 2012
By Kaye A. Thomas

The IRS came out with its annual edition of Publication 590, Individual Retirement Arrangements (IRAs), earlier than usual this year (click here for PDF). Most likely that’s because so few revisions were needed from the previous year. Sections describing what’s new for 2011, and for 2012, offer little more than a mention of the new figures for items that are adjusted annually for inflation. (These figures are available in our Reference Room.)

Taxpayers and return preparers should take note of one item affecting returs for 2011 and 2012, however. A special rule for Roth conversions in 2010 allowed the income from the conversion to be reported half in 2011 and half in 2012. You could also choose to report the conversion income on your 2010 return, but if you didn’t make that choice, you begin to pay the piper on your 2011 income tax return.

This rule applied only for Roth conversions that took place in 2010. If you did a Roth conversion in 2011, you have to report the income on your 2011 tax return.

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Posted in IRAs, Retirement

Segregate Assets After Roth Conversion?

December 11, 2010

On various occasions we’ve discussed the benefits of segregating different assets in separate Roth IRAs when doing a conversion. A reader asks whether it would be possible to achieve the same benefit, or at least a similar one, with assets that were initially converted to a single Roth IRA that was subsequently divided. (more…)

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Posted in Retirement, Roth Accounts, Tax Strategies

The Tax Deal: Rethink Roth Conversions?

December 9, 2010

It’s going to be quite a scramble to figure out what planning moves make sense in light of a suddenly changing tax landscape. One item sure to draw the attention of many is Roth conversions. Will they become more attractive? Or possibly, for some people, less attractive? (more…)

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Posted in Retirement, Roth Accounts, Tax Strategies

Sophisticated Roth Conversion Planning

December 2, 2010

Suppose you could make a double or nothing bet with your retirement account. That’s not likely to make a lot of sense, given the possibility of losing the bet. But suppose you could bet half your retirement account on some proposition, and bet the other half on the opposite proposition. Does that sound like a pointless exercise? An intriguing article by UNC law professor Gregg Polsky explains how such an arrangement could be used to cut the tax cost of a Roth conversion. (more…)

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Posted in Retirement, Roth Accounts

New Guidance on In-Plan Roth Conversions

November 27, 2010

The IRS has released a 12-page notice (PDF) providing guidance in question-and-answer form for employers that want to offer their 401k or 403b participants the opportunity to move money from a regular account to a designated Roth account within the same plan. This guidance was on a fast track so that employers could make this opportunity available before the end of 2010 for those participants who want to take advantage of the special rule, available only this year, to delay the reporting of income from a conversion — splitting it between 2011 and 2012 instead of reporting it as 2010 income. (more…)

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Posted in 401k, IRS Guidance, News, Retirement, Roth Accounts

Roth Conversions Within Employer Plans

September 24, 2010

As of September 27, 2010, employees with 401k or 403b accounts can do a Roth conversion without taking money out of the plan — but only if the employer takes steps necessary to permit these conversions. Here are questions and answers about these provisions. (more…)

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Posted in 401k, Legislation, News, Retirement, Roth Accounts

Roth Conversion and Medicare Part B Premium

July 15, 2010

A Roth conversion can affect the premium you pay for Medicare Part B (the part that provides medical insurance, as opposed to hospital insurance or prescription drug coverage). For the year of the conversion it increases your income, potentially leading to an increase in your premium. On the other hand, in later years when you’re withdrawing money from your retirement account, your income will be smaller as a result of having done the conversion in a prior year, potentially allowing you to pay a smaller premium for many years. The net benefit or detriment will depend on individual circumstances. (more…)

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Posted in Healthcare, Retirement, Roth Accounts

Friday Wrapup

July 2, 2010

A rare break in congressional gridlock produced some actual tax legislation this week, albeit of limited scope. In addition, it appears we may be heading toward an expansion in the use of Roth retirement accounts. (more…)

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Posted in Home Ownership, IRS Guidance, Legislation, News, Roth Accounts

Senate Would Expand Roth Accounts

June 30, 2010

Action in the Senate June 29 may result in expanded access to Roth accounts. One provision would take effect upon enactment, which is on a fast track. Before it can become law, the provision must be approved by the House of Representatives. (more…)

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Posted in 401k, Legislation, News, Retirement, Roth Accounts

Roth Conversions and the Medicare Tax

June 24, 2010

This is the fifth in our series on Roth conversions and tax rates. (For earlier ones, click on the “Roth conversion” tag below this entry.) Our focus here is on how the new Medicare tax on investment income may affect planning for a Roth conversion in 2010 — even though the new tax doesn’t take effect until 2013. (more…)

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Posted in Healthcare, Retirement, Roth Accounts, Tax Strategies, Taxation of Investments

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