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Jacy
Jacy, Certified Public Accountant (CPA)
Category: Tax
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Experience:  Nine years individual income tax preparation and consulting
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I am considering a 401K rollover to a Roth IRA. I have a company

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I am considering a 401K rollover to a Roth IRA. I have a company retirement account with a total of $25,000. $12,500 is in a Roth 401K and $12,500 in a regular 401K. I'm trying to figure out what my tax implication will be.

Will I only have to pay taxes on the $12,500 coming from the regular 401K?

If I opt to strectch the taxes over 2011 and 2012, will I then claim $6,250 on my 2011 tax form and $6,250 on my 2012 tax form?

Is the marginal tax rate I pay each year depend on my tax bracket for each year or is the tax rate determined by my 2010 tax bracket?
Submitted: 4 years ago.
Category: Tax
Expert:  Jacy replied 4 years ago.

Hello,

 

You will have to include only the regular 401k distribution (not the Roth 401k) in your income. The default for the IRS will be to include one-half in 2011 and one-half in 2012. You will pay the tax on this income at the tax rates for those years. If you think your tax bracket will be lower in 2010, you can elect to include all of this income on your 2010 tax return.

 

For more information, see this link:

 

http://www.irs.gov/retirement/article/0,,id=228637,00.html

 

 

Please feel free to Reply if you need additional information.

 

Thank you,

 

Jacy



Edited by Jacy on 12/1/2010 at 11:48 PM EST
Customer: replied 4 years ago.

I currently make $89,000 and live in Illinois.

 

Can you please tell me what my total tax rate is for 2010?

 

If I wanted to pay taxes on the $12,500 in 2010, can I calculate the tax I owe simply by multiplying $12,500 by the total tax rate you provide for 2010?

 

Thanks for your help!

Expert:  Jacy replied 4 years ago.

Hi,

 

If you are Single, take the standard deduction, and have no dependents, then most of the $12,500 will fall in the 28% bracket.

 

Your tax bracket is based on your taxable income, which is your gross income less deductions and exemptions.

 

So, for if you report the conversion in 2010, you will have $3,500 in additional taxes.

 

If you are married, the tax rate will most likely be 25%.

 

You will also need to pay your state income tax.

 

Thanks again,

 

Jacy

Customer: replied 4 years ago.
I just got married in October. Can we file jointly for the 2010 year then?
Expert:  Jacy replied 4 years ago.

Hello,

 

Once you are married, you must file as married for the whole year (2010), either jointly or separate. In most cases, the tax is lower if you file Joint.

 

If your wife has significant income, this may push you into a higher tax bracket for your distribution.

 

Hopefully Congress will extend the current tax rates to the next couple of years. Then you will be able to make an informed decision about what year or years to pay the tax.

 

Thanks again,

 

Jacy

 

Jacy, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 568
Experience: Nine years individual income tax preparation and consulting
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Jacy
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Nine years individual income tax preparation and consulting