IRA CONVERSION To Roth

[MargaretMort]

Can IRA conversion done in one year before April 15 be credited to preceding tax year?

You know, like making a contribution to an IRA before April 15 counts for preceding year?

MM

[kcjenkins]

I don't think so. The law allows you to count a 'contribution' as made in the prior year, if made by 4/15, but 'distributions' are counted based on the date it is actually distributed from the account.

[MargaretMort]

Thanks. I thought as much but someone, their money manager, I gather, thinks differently. What a mess this one is. MM

[JohnH]

I did have one last year who made a contribution to an IRA before Apr 15 and then immediately converted it to a Roth. Don't remember the details, but there was a reason for doing it that way at the time. Maybe because they got the IRA deduction for 2009, which they needed due to it being a high income year, but income was expected to be much lower in 2010 I think. Guess I'll be seeing it all again in the next few days.

[Pacun]

I did have one last year who made a contribution to an IRA before Apr 15 and then immediately converted it to a Roth. Don't remember the details, but there was a reason for doing it that way at the time. Maybe because they got the IRA deduction for 2009, which they needed due to it being a high income year, but income was expected to be much lower in 2010 I think. Guess I'll be seeing it all again in the next few days.

Johnh,

In your case, your client made a contribution to an IRA for 2009 by April 15, 2010 which is allowed. Then, the conversion happen minutes later but it was credited to the following year 2010.

The way I understand the question is something like going to the bank tomorrow (April 2, 2011) and say... "I want to covert all my IRAs to roth IRAs and pay taxes in 2010 because I do not want to split the tax payment between 2011 and 2012"

[MargaretMort]

No, what actually happened was that the TP income was very low in 2009 and they decided to rollover their IRAs to take advantage of the lower tax bracket. Their broker said it would be a 2009 event even though the rollover didn't occur until Mar 2010. The fund didn't agree, issuing the 1099R for 2010. I felt the broker was incorrect and wanted someone to back up my thoughts. The TP would really like the broker to be correct, of course, but has finally come to agree with our thinking.

Thanks for the help. MM

[Pacun]

No, what actually happened was that the TP income was very low in 2009 and they decided to rollover their IRAs to take advantage of the lower tax bracket. Their broker said it would be a 2009 event even though the rollover didn't occur until Mar 2010. The fund didn't agree, issuing the 1099R for 2010. I felt the broker was incorrect and wanted someone to back up my thoughts. The TP would really like the broker to be correct, of course, but has finally come to agree with our thinking.

Thanks for the help. MM

Pull out your crystal ball and choose between paying all taxes in 2010 OR splitting it between 2011 and 2012.