[[ converted my IRA to a Roth IRA last year. I now have an option to pay taxes on the entire amount on my 1998 taxes or spread it over four tax years.]]But remember that you must spread the income...not the tax. This is a very big difference.[[ When spreading the amount out over four years, does 1/4 of the total have to be applied to each tax year, or can I apply 1/2 this year and the remainder over the next three years?]]You are required to spread out 1/4 of the income over the 4 year period. You can't vary from that formula.[[ In case you are wondering why anyone would want to do this, I want to avoid being kicked into a higher tax bracket in 1998, yet I need to make my 1998 adjusted gross income as high as possible for the purposes of qualifying for a higher mortgage amount.]]Why would somebody do what? Take the income in one year? It is possible that the IRA conversion income is small, and/or that your taxable income will greatly increase over the next three years. Not many people decide to take the income all in one year, but there ARE times where it makes sense.You can read more about the income spread issue in my posts on the Roth IRA in the Taxes FAQ area. You might want to check it out.TMF TaxesRoyWant to learn more about taxes and investing? Then we have a deal for you!! The Motley Fool Investment Tax Guide is now available through Fool Mart. Be the first one on your block to own this masterpiece. It'll help you with your 1998 taxes, and it's never to early to start planning for your 1999 taxes. So just click on this link (http://www.foolmart.com/market/product.asp?pfid=MF+013+I) to read more about this amazing collection of tax information. (Apologies for the shameless plug…but it is a pretty good book…if I do say so myself). In addition, if you would like to visit the Taxes FAQ (Frequently Asked Questions) area, click on http://www.fool.com/school/taxes/taxes.htm and you'll be right at the home page. Check it out. Finally, if you need to get to the IRS web site, click on http://www.irs.ustreas.gov to go directly there.
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