To translate that ugly Abbreviated-Speak.

Is it possible to convert just part of a traditional or rollover IRA to a Roth IRA ?

- Dr. C

Is it possible to convert just part of a traditional or rollover IRA to a Roth IRA ?

Of course... and for your ongoing amusement, I suggest the following:

http://www.fairmark.com/rothira/index.htm

For Dr. C.

Yes U Can

According to http://invest-faq.com/articles/ret-plan-roth-ira.html

"If you convert only a portion of your IRA holdings to a Roth IRA, the IRS says that these withdrawals are considered to be taken ratably from each ordinary IRA account."

and

"Holders of ordinary IRA accounts will be permitted to convert their accounts to Roth IRA accounts if they meet certain criteria. First, there is a limit on MAGI of $100K for that individual in the year of the conversion, single or married. Second, taxpayers whose filing status is married filing separately may not convert their ordinary IRA accounts to Roth accounts.

That's the only reference I've been able to find that addresses your question directly and, as it happens, I was researching your question independently when you asked.

How will you decide what part of the IRA to convert?

Will you plan on converting some during each year of eligibility to convert or only once?

Regards,

Chips

Melman,
Thankyou for the link. Very informative, even though it all seems to have been written in '98 and does go on a bit too much about how you can spread the tax burden over four years if you convert in 1998. Time for an update I think.

I'm assuming that if I convert say in, March of this year, I don't actually have to pay the tax burden till April 15 of 2001. I'm correct right ? (I hope so)

- Dr. C

Dr. C asks:

"Is it possible to convert just part of a traditional or rollover IRA to a Roth IRA ?"

I say: "You betcha!" Converting a portion of your traditional IRA into Roth allows you control over the amount of money that becomes taxable each tax year. Yes, it's a bit of work, but surely worth it!

Good luck & best wishes, PP

Is there a potential mine-field here; in that the
conversion could create the need to pay additional
estimated taxes, to avoid underwithholding taxes?
- - Matthew

Dr. C writes:

<<I'm assuming that if I convert say in, March of this year, I don't actually have to pay the tax burden till April 15 of 2001. I'm correct right ? (I hope so)>>

No, not quite. That's when your income tax return is normally due. However, you are responsible for proper withholding of those taxes throughout the year. Therefore, you must have filed estimated withholding for anticipated taxes for the quarter in which the conversion took place. If you don't, then when you file on April 15 you may owe a penalty for not withholding enough estimated taxes for the year. Do not wait until April 15, 2001, to pay the final bill. Make the estimated payment now.

Regards..Pixy

<< you must have filed estimated withholding for anticipated taxes for the quarter in which the
conversion took place. If you don't, then when you file on April 15 you may owe a penalty for not withholding enough estimated taxes
for the year. Do not wait until April 15, 2001, to pay the final bill. Make the estimated payment now.>>

Ah drat and double drat. That super sucks the big one.
What kind of penalty ? Are we talking ten bucks or a thousand ???? Gosh think of all the interest the IRS would miss out on if I didn't pay till April.

Maybe I should post this question in Taxation Strategies.


Can I say, "hmmm I estimate the taxes due this quarter to be, hmmm.. A dollar!" and send that in and then just say "Hey, it was only an estimate" at the end of the year and pay the rest - the IRS has an "allowance for idiocy" clause in its code right ?

- Dr. C

<< What kind of penalty ? Are we talking ten bucks or a thousand ? >>

http://www.fairmark.com/estimate/index.htm