The rule that made higher-income folks ineligible for Roth IRA conversions expired at the end of 2009. That made 2010 a big year for conversions, because even billionaires could make the transactions. If you are among the many who took advantage last year, that’s great, but there’s more to the story. You still have some major decisions to make in 2011.
Here’s what you need to know.
When to Report the Taxable Income from a 2010 Conversion?
You have the option of deferring the taxable income triggered by a 2010 Roth conversion and then spreading it evenly over 2011 and 2012 (50 percent in each year). Other things being equal, the deferral option is obviously a good idea.
You also have the alternative option of reporting 100 percent of the conversion income on your 2010 return instead of deferring it to 2011 and 2012. <