SEARCH
« Obama Official: Corporate Tax Reform Proposal Would Cut Rate to 28% | Main | Credit Card Disclosures: Effective or Not? »
Wednesday
Feb222012

Tax Tip: Prior Roth IRA Conversion Could Cost You This Year

Comstock Images/Thinkstock(NEW YORK) -- If you converted a traditional IRA to a Roth IRA a few years back, get ready to pay the taxman.

In 2010, millions of Americans who wanted to convert their traditional IRA to a Roth were given a tax break; they were able to split the claimed income into two years -- 2011 and 2012.  But now, the first half of that income needs to be claimed on returns filed this spring.

"People may have sometime taken an action in the prior year and then forgotten that they did that," says Kathy Pickering with H&R Block. "This is a great time to look back and say, 'Did we do that conversion? What's the income that I'm going to need to recognize?  What are the taxes that I'm going to have to pay on that and do I have the money to pay those taxes?'"

And it could potentially be a lot of money -- a $100,000 conversion means taxpayers would have an extra $50,000 in income to report this year.

Taxes for new IRA conversions now have to be paid in the year of the conversion.

Copyright 2012 ABC News Radio







ABC News Radio