Converting a traditional IRA then recharacterizing

[Guest rflarson]

I have a special circumstance that I am trying to figure out regarding whether I should convert part or all of my traditional IRA to a Roth IRA in 2000. First, let me list my facts:

1) Married, filing jointly

2) 1999 AGI of $145,000 and taxable income of $93,000

3) Currently have a contributory Roth IRA in both my and my wife's name with $2,000 contribution made to each in both 1998 and 1999.

4) Am covered by a 401(k) plan at work

5) Currently have assets of approximately $75,000 in a traditional IRA that was converted from a 401(k) at a previous employer

Now for the special circumstances. I spent most of 2000 working on an Internet startup that never went anywhere (hindsight is 20/20!). During most of the year I did not have any kind of salary, living off of a severance package I received from my previous employer (hence the high 1999 income amount). I ditched the startup in September of this year for a *real* job. Due to the short period of time spent working in 2000, my total reported income for this year will only be about $28,500. The job I have now pays approximately $120,000/year with substantial bonus amounts so I expect that my income will not be below the $150,000 for 2002 or following years. Now for my questions:

1) My 401(k) plan administrator only allows me to contribute up to 15% of my salary to my 401(k) through payroll deductions. I cranked up my deductions to the 15% max but that will only result in about $5,000 in contributions to my 401(k) this year. Is there any way to contribute a lump sum amount to the 401(k) to reach my 401(k) limit for this year if the administrator doesn't provide such an option?

2) It looks like the 15% tax bracket for married filing jointly will be around $45,000 this year. Since I believe my income tax rate will be in the 28+% income tax bracket after I retire, I would like to convert as much of my traditional IRA to a Roth IRA to be taxed at the 15% rate. How do I go about converting a traditional IRA to a Roth IRA? Does it have to have a seperate account or can I just transfer it from my traditional IRA account to my contributory Roth IRA account?

3) What's the deadline to make the conversion? I have some taxable mutual funds that traditionally distribute capital gains and dividends at the end of the year and I don't know what they will be. Would I have to make the IRA conversion before 12/31/00 and then recharactarize the amount over $45,000 before 4/15/01 to ensure my income stays in the 15% level?

4) Should I consider converting my entire IRA amount while my income is low?