Conversions increase AGI? Next 3 years?

[Guest Sheila]

On the 1998 tax forms, will conversion proceeds be entered below the AGI line? If not, will it be just 1/4 of the IRA? What about in each of the following three years? Will each year have 1/4 of the IRA proceeds counted as income above the AGI line or will 1/4 of the tax, based on 1998 total proceeds, be tacked on to the bottom line tax in each of the next three years?

[Guest David Hammond SRS]

Hi Sheila,

The 4 year tax ratable treatment of 1998 conversions if chosen by the taxpayer requires that 1/4 of the conversion amount be included AS INCOME in 1998 and the next 3 years. Its 1/4 of the amount as income each of the four years not 1/4 of the tax due.

Hope that this helps.

Dave H.-SRS

[Guest Sheila]

Thanks. That's helpful. Just to confirm, the addition to income from a conversion in 1998 WILL NOT be part of the AGI limit of $100K for Roth's. Correct?

[Guest David Hammond SRS]

Hi Sheila,

Yes that is correct,

David H.