2010 Roth IRAs & Rollovers

Beginning on January 1, 2010, regardless of your income or filing status, you will be able to roll over (convert) to a Roth IRA:
- your traditional individual retirement arrangement (IRA), SEP IRA or SIMPLE IRA; or
- an eligible rollover distribution (ERD) from your or your deceased spouse's employer-sponsored retirement plan (for example, a 401(k) or a 403(b) plan).

Also, in 2010, if you are the nonspouse beneficiary of an employer sponsored retirementplan, you can do a direct trustee-to-trustee transfer of an ERD from the plan into aninherited Roth IRA regardless of your income or filing status.

A special 2-year option will apply for conversions and rollovers in 2010 only. Under this 2-year option, you will report half the taxable portion of your rollover in your grossincome for 2011 and half in 2012, unless you elect to include the entire amount in gross income for 2010.


Current Rules

Under the current rules, you can roll over your traditional IRA or an ERD from your retirement plan to a Roth IRA only if you meet both the following income and filing status requirements:
- your modified adjusted gross income (modified AGI) for Roth IRA purposes is $100,000 or less; and
- you are not married filing a separate return.

Note: These requirements do not apply to a rollover from either a designated Roth account to a Roth IRA or to a rollover from one Roth IRA to another.

When you roll over to a Roth IRA (or convert a traditional IRA to a Roth IRA), you must include any previously untaxed amounts and earnings in your gross income in the yearthey are distributed or transferred from the plan or non-Roth IRA.


What is a Roth IRA?

A Roth IRA is either an individual retirement account or an annuity that is designated as aRoth IRA when established. A deemed IRA can be a Roth IRA, but neither a SEP IRA nor a SIMPLE IRA can be designated as a Roth IRA. Unlike a traditional IRA, contributions to a Roth IRA are not deductible; however, qualified distributions from a Roth IRA are tax-free. Roth IRAs are not subject to required minimum distributions during the owner's life and contributions can continue after age 70 ½.

Contributions may be made to your Roth IRA if you have taxable compensation and, for 2009, your modified AGI for Roth IRA purposes is less than:
- $176,000 and your filing status is married filing jointly or qualifying widow(er);
- $120,000 and your filing status is single, head of household, or married filing separately and you did not live with your spouse at any time during the year; and
- $10,000 if you are married filing separately and you lived with your spouse at any time during the year. The $176,000 amount, above, increases to $177,000 for 2010; the other amounts stay the same. Conversions If you convert your traditional IRA to a Roth IRA, you may be able to 'undo' the conversion by recharacterizing it. If youconvert an amount from a traditional IRA to a Roth IRA and then transfer that amount back to a traditional IRA in the same year, you may not reconvert that amount from the traditional IRA to a Roth IRA before:
- the beginning of the year after the year in which the amount was converted to a Roth IRA or, if later,
- the end of the 30-day period measured from the day you recharacterized back from the Roth IRA. Similar rules apply for rollovers from plans to Roth IRAs.