"amending" to opt out of 2 year Roth deferral | Ed Slott and Company, LLC

"amending" to opt out of 2 year Roth deferral

I have a client (I am a fin'l advisor not tax preparer) whose CPA decided on his own to elect to spread the Roth conversion dollars to 2011 & 2012. that was not the intent. I understand the return has been efiled. We'd like to amend ASAP - certainly before 4/15/11. I am fairly confident that we cannot do that if this was after 4/15 - anyone have any thoughts on whether or not we might be able to change this if we send an "amended" return in the next couple of weeks?

I don't see a problem if you amend the return before April 18th. First, a clarification. The "election" is to pay the tax in 2010; deferring the tax to 2011/12 is the default. The code [408A(d)(3)(A)(iii)] says that "Any election under clause (iii) for any distributions during a taxable year may not be changed after the due date for such taxable year." That is, if you elect to pay the tax in 2010, you cannot change your mind after the due date of the return. The due date of the return means April, or October if the return is extended, or possibly October if the return is filed by April. The exact meaning of "due date" is not important since you plan to amend before April 18. The code does not address what you want to do, to amend the return to elect to accelerate income from 2011/12 to 2010. I suspect that you could elect to accelerate income after the due date but things get messy if you were to amend after the due date of the 2011 return and there might be underpayment penalties. I'm not aware of a IRS pronouncement on this.

I agree. Per Pub 590 p 63, the election NOT to defer can be made at anytime prior to the extended due date. Since the return has been filed, the extended due date applies so if the preparer is too busy to amend it prior to 4/18 it can be done after filing season with perhaps a small underpayment penalty for payment post 4/18. Up to 10/17/2011 all options remain open eg. amend the return, amend it again to recharacterize the conversion or any part of it, amend it back to two year deferral etc. All flexibility with 2010 conversions ends on 10/17/2011.

Pub 590 says that the election cannot be changed after the due date (including extensions) for the 2010 return. That is what the Code says. However, neither Pub 590 nor the Code says that the election NOT to defer can be made at anytime prior to the extended due date. We simply do not know whether there is a date beyond which one cannot amend a return to elect to report the income in 2010 but, so far, the IRS has not suggested that there is a deadline.
 

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