The four-year spread -- can you use it "piecemneal"?

[Guest Charlene Ives]

If you have several regular IRA accounts, and want to convert, say one, and pay the tax all at once --- and then take a second IRA account and pay the tax using the 4-year spread, can you do this?

[Guest Lyric]

The four-year spread of taxes on converting traditional IRAs to Roth IRAs was always optional, and I imagine you could do what you liked on each conversion. But the four-year spread could only be chosen for conversions completed by December 31, 1998. Any conversion thereafter requires taxes to be paid all at once for the year in question.

[Guest Lyric]

Charlene,

I have just done some more research on the matter, and I'm not sure one can opt for a four-year spread in one case and a lump sum payment of taxes in another. It seems you have to "elect" not to have the four-year spread for conversions made by December 31, 1998.

Read the text of an article by Natalie B. Choate on the rothira website:

http://www.rothira.com/choate2.htm

There's a lot of technical stuff, but scroll half way down and you'll see the question of taxes is broached under the heading "Four year spread option for 1998 conversions".

[John G]

The IRS treats all IRA funds as one big bundle of retirement assets. The 4 year election applies to all converted assets, no specific transactions. If you have four IRAs at four different institutions, IRS math at tax time blends them all together. If one was 100% deductable and the rest were not, and they are all at $2000, then you have a blend of 25% deductable.

My accountant has pointed out that husband and wife each make an election for one year or 4 yr average. Each election applies to all converted $$, but for only that spouse. Therefore, wife can 4 year and husband can 1 year if you wish.

[John G]

Duplicate erased.

[This message has been edited by John G (edited 03-22-99).]