Roth conversion question


G

George

I have a conventional IRA and may convert a portion to a
ROTH. I know I will need to add the amount to my normal
income for income tax purposes. I am doing a little
juggling to have the extra funds to pay the taxes. I know
for example I can fund my IRA for 2005 until April of 2006.
Is there a similar provision allowing me to do the
conversion in early 2006 before I file my income tax and pay
the taxes for tax year 2005?

Thanks
 
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P

Phil Marti

George said:
I have a conventional IRA and may convert a portion to a
ROTH. I know I will need to add the amount to my normal
income for income tax purposes. I am doing a little
juggling to have the extra funds to pay the taxes. I know
for example I can fund my IRA for 2005 until April of 2006.
Is there a similar provision allowing me to do the
conversion in early 2006 before I file my income tax and pay
the taxes for tax year 2005?
No. The general rule is that transactions are accounted for
in the tax year they occur. There is an exception for IRA
contributions, but none for conversions.
 
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P

Paul Thomas, CPA

George said:
I have a conventional IRA and may convert a portion to a
ROTH. I know I will need to add the amount to my normal
income for income tax purposes. I am doing a little
juggling to have the extra funds to pay the taxes. I know
for example I can fund my IRA for 2005 until April of 2006.
Is there a similar provision allowing me to do the
conversion in early 2006 before I file my income tax and pay
the taxes for tax year 2005?
No. The conversion to ROTH will need to be done IN 2005 if
that is theyear you intend it to fall. Conversions made in
2006 will get reported in that year.

You may want to consider the possibility of converting part
of the IRA this year (2005) and the remainder next year to
spread the tax hit. Be sure to look at the numbers
especially toward those future years when you may not know
what your '06' income will be.
 
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I

Ira Smilovitz

George said:
I have a conventional IRA and may convert a portion to a
ROTH. I know I will need to add the amount to my normal
income for income tax purposes. I am doing a little
juggling to have the extra funds to pay the taxes. I know
for example I can fund my IRA for 2005 until April of 2006.
Is there a similar provision allowing me to do the
conversion in early 2006 before I file my income tax and pay
the taxes for tax year 2005?
No. Conversions are reported in the year they are completed.

Ira Smilovitz
 
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H

Herb Smith

George said:
I have a conventional IRA and may convert a portion to a
ROTH. I know I will need to add the amount to my normal
income for income tax purposes. I am doing a little
juggling to have the extra funds to pay the taxes. I know
for example I can fund my IRA for 2005 until April of 2006.
Is there a similar provision allowing me to do the
conversion in early 2006 before I file my income tax and pay
the taxes for tax year 2005?
The amount withdrawn from the traditional IRA for conversion
MUST be taken by December 31, 2005 to be considered a 2005
conversion. You will have 60 days from date of withdrawal to
actually open and deposit the funds in a Roth IRA. Thus, the
answer to your last question is NO.
 
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A

Arthur Kamlet

George said:
I have a conventional IRA and may convert a portion to a
ROTH. I know I will need to add the amount to my normal
income for income tax purposes. I am doing a little
juggling to have the extra funds to pay the taxes. I know
for example I can fund my IRA for 2005 until April of 2006.
Is there a similar provision allowing me to do the
conversion in early 2006 before I file my income tax and pay
the taxes for tax year 2005?
The conversion funds must be taken from the Traditional IRA
by 12/31/05 and within 60 days transferred to the Roth.

__
Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH
 
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D

David Woods, EA, ChFC, CLU

George said:
I have a conventional IRA and may convert a portion to a
ROTH. I know I will need to add the amount to my normal
income for income tax purposes. I am doing a little
juggling to have the extra funds to pay the taxes. I know
for example I can fund my IRA for 2005 until April of 2006.
Is there a similar provision allowing me to do the
conversion in early 2006 before I file my income tax and pay
the taxes for tax year 2005?
No.
 
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A

Arthur Kamlet

No. Conversions are reported in the year they are completed.
Where "completed" here means begun. The funds being
converted from the traditional IRA must be distributed by
year end, and within 60 days, even if that's next year,
transferred to a Roth.

__
Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH
 
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S

Stuart A. Bronstein

<HTML><HEAD><TITLE>When doesn't Jay shoot by?</TITLE><META
Whoops! Looks like another forgery bypassing the moderator.
Go get 'em, Dick!

Stu

Moderator:
Send me a copy of this with all the headers and I will
put MTM's Lord High Executioner on it.
 
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