roth conversion.

[gman]

Taxpayer converts traditional to roth and has 2011 & 2012. to pay taxes. Can taxpayer opt to pay some on 2010 return. If so, can taxpayer chose how much distribution to pay on each year. Possible on 50 % in 2010, 20% on 11 and 30% in 12. How does it make IRS aware of the choices it has made on paying tax on distributions??

thanks

[Burke]

You really are asking for trouble, aren't you? He can pay it all in one year, or spread over the next two. I would not try to do otherwise.

[Kram BergGold]

only 2 options

Either report 100% in 2010 or 50% in 2011 and 50% in 2012.
There are no other options.

[JohnH]

I suppose he could recharacterize 50% of the Roth Conversion back to a regular IRA, then after 30 days do a reconversion of 20% in 2011 and 30% in 2012 (assuming he is eligible to do so in 2011 and 2012). But just how many hoops does he want to jump through and how many chances does he want to take that he will get something wrong in the process?

[zeros]

Available in 2011?

Do we have the same deal of Roth conversion as we had in 2010?

[Burke]

As far as the pay-over-next 2-years provision, not yet. Stay tuned...... ya never know what's comin'.
However, AGI limit of $100K is repealed indefinitely.

[gman]

one more question

So it would be wise to make larger estimated tax in 2011 & 2012 to cover additional tax or it is possible he would pay estimated tax penalty???

He took 150,000 and rolled it over and wife took same amount. No tax withheld.

thanks for your help

Also, when filing 2010 any additional steps to show that it was a roth rollover. 1099-r for 2010 showing distribution as taxable for those amounts.

[Gary2]

So it would be wise to make larger estimated tax in 2011 & 2012 to cover additional tax or it is possible he would pay estimated tax penalty???

Certainly for 2012, as he won't have the luxury of the penalty exemption for paying 100/110% of prior year's tax that might apply to 2011. But with this much money involved, and bank interest rates so low, many people choose to do the estimated payments now so that they know it's set aside and they get into the habit of making those payments.

[JohnH]

Given the amounts converted, was it a wise decision in the first place? Looks like he blasted right through the highest tax brackets and possibly taxed himself at rates higher than anything that it might cost him in the future. (Not to mention the possibility that the investment vehicle might DECREASE in value). Unless of course this is a sure thing and he knows he will make big bucks in the future that won't be taxed. (We've all heard that one before, too)

I had several people call me in 2010 to do Roth conversaions that made no sense whatsoever. They just wanted to do it because their financial advisor had just returned form a seminar.

[Burke]

Also, when filing 2010 any additional steps to show that it was a roth rollover. 1099-r for 2010 showing distribution as taxable for those amounts.

For the special tax treatment on a ROTH conversion, use Form 8606, page 2. It's at the top.
If you complete this form correctly, nothing appears on Line 15b of 1040 for 2010. Just in 15a.