Janitor Bob Posted February 17, 2011 Report Share Posted February 17, 2011 Client converted 100% of his IRA ($45,000) to a Roth. Now (even with half claimed as income this year and hald next year, the client still owes over $7,000 to IRS...not to mention what he owes Ohio and School district.....and he will owe likely the same amount next year. Client swears that nobody at the bank explained that he would owe taxes on it now.....Just that if he converted to Roth, he would not be taxes when he withdrew from Roth later in life. In your experiences, is there any way to help this client (other than applying fore installment payment)? Client did not have any non-deductible contributions in prior years. Quote Link to comment Share on other sites More sharing options...
Margaret CPA in OH Posted February 17, 2011 Report Share Posted February 17, 2011 Wouldn't the federal tax be due in tax years 2011 paid in 2012 and 2012 paid in 2013? I think unless one elects to pay it all IN 2011 for the conversion in tax year 2010, the tax is deferred. I just completed one this week with both converting all and the 8606 (I had a query the other day) calculating just fine and the carryover page as part of the tax summary clearly spelled out the amount of income to be included and taxed for the next 2 years, not for 2010. My clients are also Ohio residents and subject to SD tax and nothing was included in AGI on federal so not on state and SD. I don't understand how it is working for your client. Quote Link to comment Share on other sites More sharing options...
Janitor Bob Posted February 17, 2011 Author Report Share Posted February 17, 2011 Stupid moment....I was thinking that 1/2 would go on the 2010 return (filed now) and 1/2 on the 2011 return (filed in 2012) Thanks to you, I now see that it will be 1/2 on the 2011 return (filed in 2012) and 1/2 on the 2012 return (filed in 2013). Gracias Quote Link to comment Share on other sites More sharing options...
Margaret CPA in OH Posted February 17, 2011 Report Share Posted February 17, 2011 Bitte sehr (the only foreign language "You're welcome" that I know) Quote Link to comment Share on other sites More sharing options...
DonnaA Posted February 17, 2011 Report Share Posted February 17, 2011 He can always undo the conversion (all or part of it) by the due date of the return, including extensions. Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted February 17, 2011 Report Share Posted February 17, 2011 Client converted 100% of his IRA ($45,000) to a Roth. Now (even with half claimed as income this year and hald next year, the client still owes over $7,000 to IRS...not to mention what he owes Ohio and School district.....and he will owe likely the same amount next year. Client swears that nobody at the bank explained that he would owe taxes on it now.....Just that if he converted to Roth, he would not be taxes when he withdrew from Roth later in life. In your experiences, is there any way to help this client (other than applying fore installment payment)? Client did not have any non-deductible contributions in prior years. If he really wants to, he can still re-characterize the rollover, in effect reversing the conversion. For all or for part of it. I'd suggest to him that he do that for half of the amount, so that his tax bite is reduced, while still gaining some of the benefits down the road. I'd also give him the applicable portion of Pub 590 to read, so that he has a clear understanding of what his choices are and what they mean. Quote Link to comment Share on other sites More sharing options...
Janitor Bob Posted February 17, 2011 Author Report Share Posted February 17, 2011 Wow...I am learning a lot today! I was not aware you could "un-do" the conversion to Roth...I will let the client know. Danke Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted February 17, 2011 Report Share Posted February 17, 2011 The timing is important on this one, but since he still has time, it can save him a lot of pain. Quote Link to comment Share on other sites More sharing options...
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