ROTH Conversion Strategy

If you may be planning to convert some or all of your IRA’s to a Roth this year, you must choose the same tax treatment for all of your conversions. An individual converting this year (2010) can elect to to defer the tax and report half the income on your 2011 tax return, and the rest of it is reported on your 2012 return.

You can elect to report it all on your 2010 return if you wish. You cannot defer the tax on one conversion and pay the tax on another, they treatment must be the same for all.

Exception for Married Couples: One spouse can choose to pay the tax in 2010, while the other spouse can elect to defer the tax to 2011 and 2012.

Strategy: You can consider using separate Roth IRAs for different asset classes. That way, if one investment decreases in value while another increases in value, you switch the one that dropped in value back to a regular IRA, and possibly reconvert next year at a lesser value.

You have until October 17, 2011 to unconvert. You must timely file your 2010 to be able to do this strategy.

Note: there is no longer a $100,000 adjusted gross income limit on conversions. Anyone converting this year can elect to defer the income tax bill on the conversion.

Call if you need assistance on this.

Bob
(805) 264-3305

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