Income Tax Due on 2010 Roth Conversion

By Beverly DeVeny, IRA Technical Expert
Follow Me on Twitter: @BevIRAEdSlott

You will have income tax due if you went through with a 2010 Roth conversion, so make sure your tax return includes deferred income. Did you do a Roth conversion in 2010 and take the default option of deferring the income to 2011 and 2012? If so, then you must include at least half of the amount converted on your 2011 tax return. If you are filing a Form 1040, that income will show up on line 15b.

I have spoken to two accountants recently. The first one told me that he had taken a look at a return and was pleased to see that it automatically pulled in the correct amount from the 2010 Form 8606. The second accountant was not so happy. He had taken a look at a return where the amount was not pulled in. He has alerted the provider of the tax program and they are currently “looking into” the situation.

No matter who prepares your return, it is up to you to be sure that it is accurate and that you are paying the appropriate amount of income tax. So, if you did a Roth conversion and deferred the income, make sure that it is showing up on your return this year. Don’t rely on the software to do this correctly and don’t rely on the memory of your tax preparer to remember that you did a 2010 Roth conversion. In fact, as you give your tax preparer all your tax papers, remind him or her of your 2010 Roth conversion. That way they can double check the return and hopefully make the correction before the return gets sent to you.

Just remember that even if you, the tax preparer and the software “forget” about your conversion and the income due in 2011, the IRS will not.