If you happened to do a Roth Conversion during 2010, you’re likely aware that you can elect to spread the tax over 2011 and 2012, or pay all of the tax on the conversion during 2010.
But what about if you converted funds from two or more IRAs to Roth during 2010… can you have part of the funds taxed in 2010 and part of it taxed during 2011 and 2012?
Unfortunately, you can’t do this. This goes back to the one very important factor that applies to Roth conversions: the IRS considers all of your IRAs as one single, aggregated account for purposes of distribution taxability. Therefore, no matter how many accounts you may have converted from in 2010, all of the distributions must be treated the same way.
Two things allow for some flexibility on this matter though…
- If you had other distributions in 2010 (besides your conversion), these will certainly be taxed on your 2010 return, and you still can elect to have your conversion funds taxed in 2011 and 2012 if you’d like.
- If you are married, each of you can choose a different taxation method for your Roth conversion funds, effectively spreading your household taxation over all three years if you like. Your husband could have his converted funds taxed in 2010 and you could spread the tax on your converted funds over 2011 and 2012, for example.
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[...] IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (or in any attachment) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this communication (or in any attachment).2010 Roth Conversion Tax Treatment Applies to All of Your Conversions [...]