The Roth IRA conversion archives
The rules of the IRS are constantly changing and to keep up with these changes requires a lot of patience. However, for those who are interested in the significant modifications that the IRS implements to their rules, here are two such changes specific to the year 2010 with regard to converting a traditional IRA into a Roth IRSA Refer to this page: roth-ira.org, for information about the Roth IRA.
As is common knowledge, any person who owns a traditional IRA can convert their account into a Roth IRA. However up till the year 2010 IRS had a rule that prevented those who drew a salary exceeding $100,000 from converting their accounts. The salary limitation rule was repealed in 2010 and there were many who converted their accounts to a Roth IRA.
Yet another rule specific to the year 2010, is that which allowed the individuals who had converted their traditional IRA to a Roth IRA to file the resulting income as two even amounts over two years. That is any amount that the investor had to include to his gross compensation, owing to the conversion, can be split into two equal amounts, and is added over a period of two years. The total income will be covered only by the year 2012. And in order to report this to the IRS one had to fill out Form 8606.
However, the decision to either split the income over two years or add it to the financial year of 2010 was left to the investor. Yet again this was to be notified to the IRS in the form 8606. The decision to elect to not split the income gained from converting their accounts into a Roth IRA, over two years had to be a final and well thought-over move, for the IRS left the choice open only till the tax-filing due date for 2010.
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