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Roth IRA conversions: One choice for all

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in Small Business Tax

Q. I have two IRAs with different amounts. If I convert both to Roth IRAs, can I pay all the tax on one this year and spread out the tax on the other? K.M., Rutland, Vt. 

A. No. For a Roth conversion in 2010, you can split the taxable income portion evenly between the following two years (2011 and 2012) or you can choose to report all the taxable income in 2010. But you must use the same taxation method for both of your conversions this year.

Also, the taxable portion of the conversion is determined by the amounts in all your traditional IRAs, not just the ones (or one) being converted to a Roth.

Tip: Once the tax filing deadline for 2010 (plus extensions) has passed, you can’t change the tax treatment. The choice is irrevocable.

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