New Visitors Privacy Policy Sponsorship Contact Us Media
Baby Boomers Family Green Home and Auto In Critical Condition Just Starting Out Lifestyle Money
- advertisement -
Bankrate.com
News & Advice Compare Rates Calculators
Rate Alerts  |  Glossary  |  Help
Mortgage Home
Equity
Auto CDs &
Investments
Retirement Checking &
Savings
Credit
Cards
Debt
Management
College
Finance
Taxes Personal
Finance

George Saenz, the Bankrate.com Tax Talk columnistToo late for IRA conversion

Dear Tax Talk,
I know that you can make a contribution to an IRA or Roth IRA for 2006 up until taxes are due in 2007. But can you also make a conversion contribution from an IRA to a Roth IRA for 2006 up until taxes are due in 2007?

Also, is there a limit on the amount of money you can put in the conversion contribution? I am retired and should have converted money from IRA to Roth in 2006 to increase my reportable income for 2006 taxes. I failed to convert money to the Roth by the end of the year. As a result, I am going to have tax deductions for 2006 that will be wasted because I won't have enough reportable income to use all of them. Is there any way out of this problem?
-- Betty

- advertisement -

Dear Betty,
In order to have made a conversion from traditional IRA funds to a Roth IRA, you would have needed to withdraw the funds prior to the end of 2006 and made the rollover into a Roth within 60 days. Converting funds to a Roth IRA involves the individual including in income the amount transferred from a traditional IRA to a Roth IRA.

When an individual has deductions in excess of income for the year, this income inclusion does not result in any additional taxes. Hence, the Roth conversion makes sense. Unfortunately you are too late to utilize your excess deductions for 2006 and most likely those deductions, unless business-related, will be lost forever.

An individual can recharacterize a contribution to a traditional IRA up until the due date, including extensions of his or her individual return. A recharacterization of a contribution differs from a conversion as it only involves current-year IRA contributions (i.e., those that fall under the annual contribution limit rather than the funds already in the account). In this case there is no income inclusion, as the IRA funds were never deducted.

To ask a question on Tax Talk, go to the "Ask the Experts" page and select "taxes" as the topic.

Bankrate.com's corrections policy-- Posted: Jan. 17, 2007
Read more Tax Adviser columnsAsk a question
 RESOURCES
Converting to a Roth IRA
Take control of your IRA conversion
7 steps to take at age 59
 TOP TAX STORIES
June 15 filing deadline for some
Find the tax professional who's right for you
Coming up with tax cash


Compare Rates
NATIONAL OVERNIGHT AVERAGES
30 yr fixed mtg 4.45%
48 month new car loan 3.77%
1 yr CD 0.89%
Rates may include points
Mortgage calculator
See your FICO Score Range -- Free
How much money can you save in your 401(k) plan?
Which is better -- a rebate or special dealer financing?
VIEW MORE CALCULATORS
- advertisement -
- advertisement -

About Bankrate | Privacy Policy/Your California Privacy Rights | Online Media Kit | Partnerships | Investor Relations | Press Room | Contact Us | Sitemap
NYSE: RATE | RSS Feeds |

* Mortgage rate may include points. See rate tables for details. Click here.
* To see the definition of overnight averages click here.

Bankrate.com ®, Copyright © 2014 Bankrate, Inc., All Rights Reserved, Terms of Use.