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<< In 1998 I converted my Traditional IRA to a Roth IRA. The converted amount is to be spread out over 4 years. I had HR Block prepare my tax return to assure that this conversion was taken care of correctly. My traditional IRA consisted of $2000 annual contributions from years 95,96,97. Of those years, only 1995 was tax deductible because in 1996 and 1997 I contributed also to my 401K program. So even despite explicitly telling the person at HR block all of this...I am being fully taxed on my entire rollover...somehow the $4000 "already taxed" contribution is being included on the amount that I have to pay taxes on for the 4 years. >>

You need to file an amended 1998 return. I suggest that you go to Block and demand that they fix it for free. Make noise until they do.

So you'll know they got it right this time, the revised Form 8606 should show a taxable conversion of the total amount converted minus the $4,000 in nondeductible contributions. One quarter of that difference will be included in your 1998 income. You should wind up with, at a bare minimum, Form 1040X and Form 8606. Be sure to include the correct amount, not the amount from your original return, on your 1999 return.

IRS will pay interest on your refund. Don't forget to include that interest on your 2000 return.

Phil Marti
Tax Preparer
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