Today TaxMama hears from Billie in the TaxQuips Forum who’s getting conflicting information. “In 2010 there was this nice ‘deferment’ one could take advantage of when converting a traditional IRA to a ROTH. By doing that in 2010, you could postpone half of the taxes due to 2011 and the other half to 2012. My question is, on April 15th of which year was the tax due? Was it April 18, 2011 and 2012? Or was it April 15, 2012 and April 2013? I’ve had both answers to this question, and NEED to know the REAL deal!”

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If you have an IRA and are considering converting it to a Roth IRA, 2010 is the perfect year to do it. As explained on TaxMama.com, the Tax Increase Prevention and Reconciliation Act of 2005 made significant changes to the rules governing conversions of traditional IRAs to Roth IRAs. These changes are particularly beneficial for taxpayers in 2010.

One of the biggest changes is the removal of the $100,000 adjusted gross income (AGI) limit for conversions. This means that anyone, regardless of their income, can convert their traditional IRA to a Roth IRA in 2010.

Additionally, for taxpayers who convert their traditional IRAs to Roth IRAs in 2010, the resulting tax liability can be spread over two years – 2011 and 2012. This can provide significant tax savings, as it allows taxpayers to defer the tax liability associated with the conversion.

Another advantage of converting to a Roth IRA in 2010 is that it allows taxpayers to take advantage of potentially lower tax rates. With the Bush-era tax cuts set to expire at the end of 2010, many taxpayers are likely to face higher tax rates in the future. By converting to a Roth IRA in 2010, taxpayers can lock in the current, lower tax rates and potentially save money in the long run.

It’s important to note that while there are significant benefits to converting to a Roth IRA in 2010, there are also potential drawbacks to consider. For example, the tax liability associated with the conversion can be substantial, and taxpayers should carefully consider their financial situation before making a decision.

TaxMama.com recommends discussing the potential conversion with a financial advisor or tax professional to determine whether it is the right move for you. These professionals can help evaluate your individual financial situation and provide guidance on the best course of action.

Overall, the 2010 IRA to Roth rollover presents a unique opportunity for taxpayers to take advantage of the changes to the rules governing conversions and potentially save money on taxes. By carefully weighing the benefits and drawbacks and seeking professional guidance, taxpayers can make an informed decision about whether to convert their traditional IRA to a Roth IRA in 2010.