Dear Tax Talk,
I rolled over my traditional individual retirement account into a Roth IRA in 2010. It was $19,000. Do I have to pay taxes on that, or can I get around not paying taxes? Can I change it back? I am 59 and do not need this money. I did not pay taxes in 2010 or 2011. Thanks!
Why would you think that you don’t have to pay tax on a Roth IRA conversion? Special rules allow you to spread out the tax for 2010 conversions, but you still have to pay the tax. If you converted amounts from a traditional IRA in 2010 to a Roth IRA, any amount you have to include in income as a result of the conversion is generally allocated in equal amounts in 2011 and 2012. If you already filed your 2011 tax return, you’ll need to amend it to include half of the conversion in income. If you extended your return to the October deadline, you’ll need to include that amount when you do file. The balance would go on your 2012 tax return.
Although you can recharacterize prior rollovers, this would have had to be done by the due date of the 2010 tax return, including extensions. A special relief provision would give you an additional six months beyond the extended due date to have made the recharacterization. However, even if you filed for an extension of your 2010 tax return, it is too late to make that recharacterization.
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More On Roth IRA Conversions:
- Convert IRA to Roth calculator
- Why a Roth IRA conversion makes tax sense
- How to pay taxes on a Roth IRA conversion