A lot of people are considering the conversion of all or a portion of their retirement savings to a Roth IRA in 2010. The Winter 2010/Volume 9 edition of the IRS’s Employee Plans News contains, among other matters pertaining to Roth IRAs, some guidance on converting a traditional IRA or other retirement savings to a Roth IRA after 2009. Here is what it says.
Beginning January 1, 2010, the income and filing status requirements for rollovers (including conversions) to a Roth IRA will be eliminated. Additionally, for rollovers to a Roth IRA in 2010 only, a special 2-year option for reporting the taxable portions of the rollover will apply. Under the current rules, you can roll over a traditional individual retirement arrangement (IRA), a SEP IRA, a SIMPLE IRA and an eligible rollover distribution (ERD) from your retirement plan (other than from a designated Roth account) and from a plan in which you are the named beneficiary to a Roth IRA only if you meet both these requirements:
• your modified AGI for Roth IRA purposes is $100,000 or less; and
• your filing status is not married filing separate.
There are no such restrictions on rolling over amounts into a Roth IRA from either another Roth IRA or from a designated Roth account. Any previously untaxed amounts must be included in your gross income in the year of the rollover.
Under the new rules for 2010, regardless of your income or filing status, you will be able to roll over (convert) the following to a Roth IRA:
• your traditional IRA, SEP IRA or SIMPLE IRA;
• an ERD from your retirement plan (for example, a 401(k) or a 403(b) plan); or
• an ERD from a retirement plan for which you are a beneficiary.
For rollovers and conversions to a Roth IRA in 2010 only, you will have the option of reporting the taxable portion of your rollover in your gross income for 2010, or reporting half in 2011 and half in 2012.