<<Here's my plan. I've $4000 and want to get it all in a Roth IRA. I'll put $2000 in a traditional non-deductable IRA before April 15th as my 1997 contribution , then convert it to a Roth IRA almost immediately, owing taxes only on the pittance earned between transactions.

The next step is where it becomes a little fuzzy. After converting to a Roth IRA, can I contribute my $2000 1998 contribution to the same account or do I have to open another Roth IRA account. I've read conflicting accounts and understand that this issue may have only recently been decided?

I'd really appreciate info from someone who really knows the latest ruling on this. >>

The earlier responses to your post provided good information. The main points are:

1. The law permits you to make annual (non-rollover) contributions to a rollover Roth IRA.

2. Depending on how the technical corrections act ends up being written, it's possible you would end up with more flexibility to take money out without a penalty within the first five years after creating your IRA if you keep rollover contributions in a separate Roth IRA from annual (non-rollover) contributions. But this consideration doesn't apply if you leave the money in the IRA at least five years. And it's of minimal importance in your situation because you will have close to zero earnings in your IRA at the time of the rollover, and therefore close to zero penalty no matter what you do.

3. The IRS wanted to prevent people from being trapped by the technical corrections act and issued a notice *recommending* that they keep rollover and non-rollover money in separate Roth IRAs. A number of brokerage houses are either overly cautious or misinformed and are not permitting their customers to combine rollover and non-rollover Roth IRAs.

So, you can execute the plan you have set out, but only if your broker will permit it. If your broker won't permit it and you still want to use that broker, you can do as another response suggested: make a 1997 *and* 1998 contribution to the regular IRA and then roll your $4,000 regular IRA to a Roth IRA -- assuming your broker doesn't have some problem with that, too. (There's no reason why he should.)

The rules on rollovers to Roth IRAs are now spelled out in the recently expanded Roth IRA portion of my web site.

KAT in Chicagoland
www.fairmark.com
Tax Guide for Investors
Now with expanded and revised
Roth IRA information