Practice Quiz

Financial Planner

Category - Retirement Savings and Income Planning

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Tara wants to convert her traditional IRA into a Roth IRA, but she is not sure she can do it. What should you check to confirm that Tara can do the conversion?
  1. See if she has a modified AGI that exceeds $100,000
  2. Determine if she is married but filing a separate tax return
  3. Nothing, there are no conversion rules
  4. Both A and B
Explanation
Answer: D - To confirm a client can convert from a traditional IRA to a Roth IRA it is necessary to check if their modified AGI exceeds $100,000 and if they are married but filing a separate tax return. The $100,000 AGI limit applies to both single and married individuals filing joint returns. This rule is eliminated beginning in 2010. Taxpayers will also have the option to pay the income tax on conversions during 21010 over a two-year period. However, the exception is for individuals who have lived apart from the spouse for the entire taxable year. In this case, the individual can be treated as not married and can file a separate tax return.
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