Individual retirement accounts are common investments for those interested in building their nest eggs. As of January 1, 2010, the Internal Revenue Service has changed the guidelines surrounding the conversion or rollover of a traditional IRA or qualified employer plan to a Roth IRA.
Under the new rules, the $100,000 modified adjusted-gross-income limitation that prevented many from converting or rolling over their accounts has been eliminated, according to the IRS. Additionally, taxpayers who convert or roll over traditional IRAs or employer plans, such as a 401(k), to a Roth IRA in 2010 can choose to report and pay on all conversion income in 2010 or report half the conversion income in 2011 and the remainder in 2012, the IRS reports.
Though Roth contributions are not tax-deductible on income tax returns, many Americans prefer Roth IRAs to traditional or employer plans because they allow income to build tax free, according to the Post-Crescent, a Wisconsin newspaper.
The economic downturn has made Americans more diligent about building their retirement income. Taxpayers who are considering converting or rolling over their traditional IRAs or employer plans should keep these new changes in mind during tax preparation.
Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.