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Subject:  Problem with Rollover Date:  2/7/2007  11:03 PM
Author:  eurobask Number:  91879 of 131086

I plugged in our tax info into TaxCut and am facing a warning (and higher taxes than initially anticipated) related to a Rollover to Roth conversion this year, where 403b assets from my wife's previous employer were moved into a Rollover IRA and I estimated we'd be safe in moving these same Rollover assets into her Roth IRA account (through Firstrade). Upon doing a "Final Check" for our federal return, it states "It appears that your spouse may have made an erroneous conversion because your MAGI exceeds $100K. ..... If our MAGI >$100K, this is an erroneous conversion and your spouse must recharacterize it."

I've a few questions from this, as I contend the $100K statement:
1) What constitutes MAGI? I found "Adjusted gross income ("AGI") represents your total income reduced by certain deductions known as "adjustments," but before you take your itemized deduction or standard deduction, and before you take the deduction for personal exemptions."

So would this mean our collective income from Box #2 from our W-2s? Would this not include the IRA distributions (of $8.5K)?
2) If it turns out our MAGI does exceed that limit, then in performing the recharacterization of a certain portion of that $8.5K to get us beneath the $100K limit, would we be subject to any fees or penalties?

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