Roth Conversion Issues in Wisconsin Resolved.

The insanity has ended. Wisconsin Governor Jim Doyle signed 2009 Act 161 into law March 15, 2010. Wisconsin residents are now able to convert traditional IRAs into Roth IRAs without penalty, even if their adjusted gross income exceeds $100,000.

Also, Wisconsin residents have the option of paying all the tax on conversion in 2010 or half in each tax year of 2011 and 2012.

2009 Act 161 includes some provisions of the federal Heroes Earnings Assistance and Relief Tax Act of 2008. Details are available here.

Wisconsin taxpayers that made Schedule I adjustments on their 2008 or 2009 tax return should amend these returns to reflect the benefits of 2009 Act 161.

Roth IRA Tango

For 2010, regular IRA's can be coverted to a Roth IRA without any income limitation. Currently, taxpayers with an AGI above $100,000 cannot convert to a Roth.

Here are some tax strategies for high incomers to consider:

• You can set up a regular IRA and make nondeductible contributions and converting to a Roth in 2010. Tax is due on the earnings only.
• You have the option to report half the income in 2011 and the remaining half in 2012.
• If you convert to a Roth early in 2010, you start accumulating earnings tax-free sooner.
• Remember, distributions after attaining age 59 1/2 are tax and penalty free.
• Roth IRAs have no required minimum distributions for people age 70 1/2 and over.

Review these options with your tax professional before implementing a tax strategy. Additional advantages may be available to you.