On The Money

2010 Roth IRA conversions for Wisconsin Taxpayers by Victor Schultz, vice president and associate general counsel, M&I Wealth Management

Taxpayers with more than $100,000 in adjusted gross income are now eligible to convert their individual retirement accounts to a Roth IRA. Conversion is a compelling tax-planning opportunity because: 1) you avoid income tax on future Roth IRA earnings; 2) you lock in tax at today’s historically low income tax rates; 3) you avoid required minimum distributions at age 70 ½; 4) your taxable income will be lower during retirement; 5) beneficiaries of your inherited Roth IRA will receive tax-free distributions; and 6) if you convert in 2010, you may defer recognition of income until 2011 and 2012.

Wisconsin has not yet adopted the federal laws regarding 2010 Roth IRA conversions. According to the Wisconsin Department of Revenue, any 2010 Roth IRA conversion will be fully taxable in Wisconsin in 2010 and the conversion may be subject to an annual 2 percent excess contribution penalty plus a one-time 3.33 percent early withdrawal penalty.

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