Tax Law (Questions About Taxes)/Roth IRA Conversion

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Question
Greetings John,
 I am interested in converting my rollover Traditional IRA of $42,000 to a Roth IRA.  What is the best way to reduce my tax burden?  I waited until this year because I am in my last year as a full-time student and I didn't want to jeopardize my scholarship.  I have virtually no income this year and figured it would be best to do the conversion this year.  My question is, what are the Tax consequences given I have no income?  Should I transfer the full amount of 42K or would it be less costly to transfer 1/2 this year and then 1/2 next year?  I guess, I would like to know what are my taxes for each option?

Thanks for the help!

Answer
Christian,

Thanks for your question.

I presume you are single since you did not mention it. Since I do not have full information and this is a volunteer forum, I cannot calculate your tax liability as stated in my instructions.

If you rolled it over this year in full with no other income, you would have approximately $31,000 subject to income tax.  Approximately $9,000 would be taxed at 10% with the remained at 15%

Next year, with other income, the rollover would be added to your earned income and the rate could be between 15 and 39.6%. Without marital status, income level, and deduction information, I couldn't calculate your liability.

Hope this helps.

John Stancil, CPA

Tax Law (Questions About Taxes)

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John Stancil, CPA

Expertise

I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

Experience

I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

Organizations
FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

Publications
The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

Education/Credentials
DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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