Roth IRA holders can commingle Contributory and Conversion Roth IRAs in a single Account. Recently I was advised that we may wish to require customers at least to maintain a separate account for any amount converted from a Traditional IRA to a Roth IRA in calendar year 1998, as IRS guidelines require a withdrawal from a 1998 conversion Roth IRA within the first 5 years to be reported on Form 1099-R with a "special letter code." I'm advised that all other withdrawals from Roth IRAs are reported on Form 1099-R with a different letter code. Thus, requiring a separate account for 1998 conversions may help comply with this requirement.

QUESTION: Are separate accounts in this situation necessary, or hasn't TTCA-98, by reason of ordering distributions, done away with the advisability of separate accounts for 1998.

The new ordering and distribution rules for Roth IRAs have done away with the primary need for the two types of Roth contributions to be maintained separately. Furthermore, Announcement 98-106 made the use of the special letter code "K" optional - that is all distributions from a Roth IRA can be reported using "J" since it is now up to the individual to determine the tax consequences of a distribution. However, many organizations' systems have not been updated yet to allow the accounts to be commingled. In our situation, we are waiting until the regulations are finalized before we update our system to commingle the accounts. Changes can be costly and the IRS has been known to change its mind before!