ROTH IRA question (headache)

[Guest joeyboy]

Thanks in advance for the any advice. Here's the situation:

In October 2000, I opened and fully funded ROTH IRAs for both my wife and me. Come 2000 tax filing time in April of 2001, we found that due to our income and ROTH phase out rules we could not fully contribute to ROTHs. So we recharacterized a portion of each roth to traditional IRAs.

So we filed taxes for 2000 each having a ROTH and a TRADITIONAL.

We then filed taxes for 2001 and we had each fully funded our ROTHs for 2001 (which we were allowed to due this time)

Now we are in 2002 and my question is this: can I make the traditional IRAs amounts (which we were "forced" to create because of our one-time high income level in 2000) into ROTH IRAs this year.

Or is there some rule that since they went from ROTH to TRADITIONAL that they cant go back to ROTH?

Or I have I simply passed out from exhaustion?

thanks again.

[John G]

You can convert any regular IRAs in to Roth if you are below the income threshold which is 100,000 if you are married filing jointly. Note this is lower than the income threshold to just contribute to a Roth. If you were in the 150-160K range in the prior year, your income would have to decline substantially to qualify for a conversion. A good time for a conversion is when you change jobs and have an income gap which might allow you to qualify and keep your tax rate down.

Prior classifications of the assets or reclassifications which occured in an earlier tax year will have no impact on the conversion. There are some IRA rules that limit actions to just once per year.... they don't appear to apply here.

See the below article on conversions which can be found at www.rothira.com :

http://www.rothira.com/recharacter.htm