The Internal Revenue Service said Tuesday that taxpayers need to report Roth individual retirement account conversions from 2010 on their returns this tax season.
In most cases, taxpayers who converted amounts to a Roth IRA or designated Roth account in 2010 must report half of the resulting taxable income on their 2012 returns, the IRS said.
Normally, Roth conversions are taxable in the year the conversion occurs. For example, the taxable amount from a 2012 conversion must be included in full on a 2012 return. But under a special rule that applied only to 2010 conversions, taxpayers generally include half the taxable amount in their income for 2011 and half for 2012, unless they chose to include all of it in income on their 2010 return.
Roth conversions in 2010 from traditional IRAs are shown on 2012 Form 1040, Line 15b, or Form 1040A, Line 11b. Conversions from workplace retirement plans, including in-plan rollovers to designated Roth accounts, are reported on Form 1040, Line 16b, or Form 1040A, Line 12b.
Taxpayers who also received Roth distributions in either 2010 or 2011 may be able to report a smaller taxable amount for 2012. For details, see the discussion under 2012 Reporting of 2010 Roth Rollovers and Conversions on IRS.gov. In addition, worksheets and examples can be found in Publication 590 for Roth IRA conversions and Publication 575 for conversions to designated Roth accounts.
Taxpayers who made Roth conversions in 2012 or are planning to do so in 2013 or later years must file Form 8606 to report the conversion.
As in 2010 and 2011, income limits no longer apply to Roth IRA conversions.