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|Subject: IRA Contributions/Conversion||Date: 3/31/2000 7:00 AM|
|Author: JLMoran||Number: 20812 of 76891|
I think this is a pretty basic question, but I couldn't find the answer anywhere on the "all about IRA's" series of articles or in an FAQ anywhere.
I have an IRA that I just opened in January with funds rolled over from my old employer's 401(k) plan. There's about $20,000 in the account as of the close of the market yesterday.
My current joint AGI should be in the neighborhood of $96,000 this year. Given this, I have 3 questions.
1) Can I make my usual $2,000 contribution to this IRA? I have no interest in keeping it "pure" for a future rollover.
1a) If I can make contributions, do I have to pay taxes on the rolled over funds? Or is the after-tax contribution simply accounted separately?
2) This is most likely the last year I will have an AGI below the conversion threshold of $100,000. I'm contemplating converting this IRA to a Roth, but then I'm going to be socked with an additional $7,000 or so in taxes due (assuming I stay at a combined Federal and NJ State tax rate of about 33%). If I were to adjust my W-4 withholding, that would amount to an additional $370 per paycheck withheld -- a big pill to swallow, especially when my wife and I are expecting our first child in September.
I can completely eliminate my 401(k) contributions at my present job and that would just about cover the difference (but not quite, since tax would now be withheld from that money), but that seems rather foolish (small "f"). If I can continue making contributions to the IRA as is, then I'd just as soon do that.
Thanks in advance! :-)
P.S. I'm going to also post this on the taxes board, since I'm not sure which is the correct place.
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