Home » RETIREMENT PLAN » IRA (Page 2)
Category Archives: IRA
Convert to a Roth IRA in 2010 and Take Advantage of the Special Two Year Option
By Stacie Clifford Kitts, CPA
Did you know that beginning on January 1, 2010, just about anyone will be able to convert (roll your retirement account) to a Roth IRA: Here’s what you can convert:
- • a traditional individual retirement arrangement (IRA), SEP IRA or SIMPLE IRA; or
- • an eligible rollover distribution (ERD) from your or your deceased spouse’s employer-sponsored retirement plan (for example, a 401(k) or a 403(b) plan).
Prior to January 1, 2010, you could only convert to a Roth IRA if your AGI (modified adjusted gross income for Roth IRA purposes) was $100,000 or less and you were not married filing separately.
Also, remember, there will be a tax consequence to your conversion. If you roll over or convert to a Roth IRA, the previously untaxed amounts must be included in your gross income.
However, for tax year 2010, there will be a special 2-year option that will apply to your conversion. Unless you elect to include the entire taxable converted amount in your 2010 income, you can report half in 2011 and half in 2012.
Info About IRA Contributions
There is still time to make contributions to your traditional Individual Retirement Arrangement, better known as an IRA. Below are the top ten things you should know about money you put aside for retirement in an IRA.
You may be able to deduct some or all of your contributions to your IRA and you also may be eligible for a tax credit equal to a percentage of your contribution.
Contributions can be made to your traditional IRA at any time during the year or by the due date for filing your return for that year, not including extensions. For most people, this means contributions for 2008 must be made by April 15, 2009.
The amount of funds in your IRA are generally not taxed until you receive distributions from that IRA.
To figure your deduction for IRA contributions, use the worksheets in the instructions for the form you are filing.
For 2008, the most that can be contributed to your traditional IRA generally is the smaller of the following amounts: $5,000 or the amount of your taxable compensation for the year. Taxpayers who are 50 or older can contribute up to $6,000.
Use Form 8880, Credit for Qualified Retirement Savings Contributions, to determine whether you are also eligible for a tax credit.
You cannot deduct an IRA contribution or claim the Credit for Qualified Retirement Saving Contributions on Form 1040EZ; you must use either Form 1040A or Form 1040.
To contribute to a traditional IRA, you must be under age 70 1/2 at the end of the tax year.
You must have taxable compensation, such as wages, salaries, commissions and tips. If you file a joint return, only one of you needs to have compensation.
Refer to IRS Publication 590, Individual Retirement Arrangements, for information on the amounts you will be eligible to contribute to your IRA account.
Both Form 8880 and Publication 590 can be downloaded at IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676).
Stacie's Tax Stuff 