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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22386
Experience:  Taxes, Immigration, Labor Relations
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1. Can I still convert my traditional IRA to a Roth IRA via

Resolved Question:

1. Can I still convert my traditional IRA to a Roth IRA via the 2010 high income exemption (just pay taxes, no penalties) and pay the taxes over two rather than three years?

2. Can I convert my self-directed QRP into the same Roth IRA (using the same exemption - taxes, no penalties)? If conversion of my QRP is allowed, does it need to be a separate Roth IRA than the one I converted my regular IRA into (assuming the answer to question 1 is yes)?

3. If the answers to 1 and 2 are yes, can I continue to contribute to my regular IRA and QRP on an annual basis (my income is over the Roth maximums)?

4. Can I roll the balances in my regular IRA and QRP into my Roth every few years, or, once the exemption is expired, will I be stuck with whatever got into the Roth and the rest in the regular IRA and QRP?
Submitted: 2 years ago.
Category: Tax
Expert:  Lev replied 2 years ago.
Hi and welcome to Just Answer!
1. Can I still convert my traditional IRA to a Roth IRA via the 2010 high income exemption (just pay taxes, no penalties) and pay the taxes over two rather than three years?
You may convert your traditional IRA to a Roth IRA - there is no income limit. However if you convert in 2011 - that income will be reported on your 2011 tax return. There is no penalty for conversion.
2. Can I convert my self-directed QRP into the same Roth IRA (using the same exemption - taxes, no penalties)? If conversion of my QRP is allowed, does it need to be a separate Roth IRA than the one I converted my regular IRA into (assuming the answer to question 1 is yes)?
Yes - you may convert funds from your qualified retirement plan into Roth IRA and you may use the same Roth IRA account - to do so - you need to consult with the administrator/custodian or both account. Please consult with the administrator of your QRP if they allow to move funds out of your account. There is no penalty on conversion. However converted amount will be added to your taxable income - so you might want to avoid large conversion in any single year.
3. If the answers to 1 and 2 are yes, can I continue to contribute to my regular IRA and QRP on an annual basis (my income is over the Roth maximums)?
Yes - you may continue your contributions. The fact of conversion doesn't affect your contributions.
4. Can I roll the balances in my regular IRA and QRP into my Roth every few years, or, once the exemption is expired, will I be stuck with whatever got into the Roth and the rest in the regular IRA and QRP?
According to the current law - you may convert account to your Roth IRA - there is no issue. However we may not guarantee that the law would not change.

Let me know if you need any help or clarification.
Customer: replied 2 years ago.

Sorry for the delay responding. I have been indesposed.

 

On #1, I thought there was a 2010 law allowing the conversions to be spread over 3 years. Do I still get the benefit of spreading it over 2 years if I convert this year?

 

On #4, as I understand your answer, each year I can contribute the max to my QRP and IRA, then roll both amounts into my Roth without penalty (though I have to pay income tax on the amount) even though I am well over the Roth income thresholds?

Expert:  Lev replied 2 years ago.

On #1, I thought there was a 2010 law allowing the conversions to be spread over 3 years. Do I still get the benefit of spreading it over 2 years if I convert this year?

Yes - that is correct. However that provision was available only for conversions occurred in 2010 and is not available for 2011 or later conversions.. My understanding is that you did not make conversions in 2010. The situation would be different if you made conversion during 2010 - in this case your tax liability would be spread over 2011 and 2012.

On #4, as I understand your answer, each year I can contribute the max to my QRP and IRA, then roll both amounts into my Roth without penalty (though I have to pay income tax on the amount) even though I am well over the Roth income thresholds?

That is correct. Starting 2010 - the modified AGI and filing status requirements for converting and rolling over amounts to a Roth IRA are eliminated.

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22386
Experience: Taxes, Immigration, Labor Relations
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