Trad to Roth IRA conversion - tax Q

[formerexpat]

I converted a Trad IRA to a Roth IRA in 2010 as was allowed by the IRS, with no income limits and the ability to spread the tax impact to 2011 and 2012.

So, now I'm here in 2011 and wondering whether the taxes on this conversion have to be calculated in a certain manner?

Do I have to take half of the converted amount in each year and pay the tax consequence each year or just make sure I report the full amount by the time I complete my 2012 tax return?

Thanks for your advice.

[mwcpa]

If you "deferred" the reporting of the income on a 2010 IRA conversion as Congress allowed as you noted above then 50% of the amount is reported in 2011 and 50% is reported in 2012.

That means, if you converted $100,000 from a regular IRA to a Roth IRA that $50,000 of the income is reported in 2011 and $50,000 is reported in 2012.

If income before the pick up of the convert amount was say $150,000, with the pick up your income is now $200,000 for 2011.

[formerexpat]

Thanks MW - I thought it was a 50% split in each of the two years, just didn't know if I had the opportunity to set it up any differently if I chose.

Appreciate the help

[mwcpa]

the law allowed a 50/50 split or 100% pick up... nothing else....

for those who made (will make) more money in 2011 and 2012 you may find a big tax surprise if you did the 50/50 split, I only had a few clients avail themselves of this break.... I had more set up their own individual customized conversion plans where they converted enough to not incur any tax or not jump tax rates (by example, I had a client who had a net operating loss, we used some of it to allow for a conversation of some of his traditional IRA to a Roth IRA.... we got a good tax result out of a bad business transaction)