The Motley Fool Discussion Boards

Previous Page

Financial Planning / Tax Strategies

URL:  http://boards.fool.com/hello-hi-there-chuck-im-just-trying-10446454.aspx

Subject:  Re: Social Security Taxes on Conversion to Roth Date:  12/4/1998  8:08 PM
Author:  TMFTaxes Number:  6764 of 121572

[[Hello,]]

Hi there, Chuck...

[[ I'm just trying to calculate all the ramifications of my converting a traditional IRA to a
ROTH.]]

It CAN get to be a bit of a pain, eh??

[[ I understand that I will have to include the converted amount as income on my tax return.]]

That's correct. But remember that you can either spread the income out over a 4-year period, or take the income all in one year for a conversion made before 12-31-98. The option is completely yours.

[[ What I need to know is if the conversion income is used to calculate FICA. Since I am self
employed, I pay the whole tamale and I'm not sure if FICA was paid on the original investment in
previous years.]]

Nope...the conversion income will NOT be subject to FICA or SE taxes. It is treated as "pension" income, not subject to FICA taxes whatsoever.

But please remember that if you are receiving Social Security benefits, this additional income WILL push your adjusted AGI higher, and make more of your SS benefits taxable.

[[ Thanks for your help]]

I hope I did...

TMF Taxes
Roy

Want 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. There is still time available to do that tax planning (and tax saving) before the end of the year. 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. Pay special attention to the "archives" section. 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.

Copyright 1996-2014 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us