Can a Husband & Wife Elect Different Periods for Paying Taxes on a Roth Conversion?

by Will Gish, studioD

A Roth individual retirement account offers a different set of benefits than a traditional IRA. If you and your spouse decide to convert a traditional IRA to a Roth, you both must pay taxes where applicable. The question of whether a husband and wife can elect different periods for paying taxes on a Roth conversion comes down to a few things, most notably the nature of an IRA.

IRA Conversion

An IRA conversion is the process of converting the funds in a traditional IRA to a Roth IRA. Before 2010, the Internal Revenue Service limited conversions based on maximum annual gross income -- only people earning less than $100,000 per year could convert a traditional IRA into a Roth. This restriction no longer exists. Online calculators, such as the one found on Smart Money, a Wall Street Journal website, helps you determine whether you should covert your IRA by examining your financial situation.

Conversion Taxes

Converting an IRA leaves you susceptible to taxation. Traditional IRAs constitute tax-deferred accounts -- you pay tax on the money in such an account when you withdraw it. With a Roth IRA, you pay taxes when you put the money into the account. Thus you must declare all money converted into a Roth IRA as income on your annual taxes. This may move you into a higher tax bracket. Though you pay income taxes on a conversion, the IRS exempts you from the 10 percent tax usually charged with withdrawal of funds from a traditional IRA.

Conversion and Timing

Two important timing aspects affect Roth conversions. As per IRS regulations, you and your spouse can convert an IRA over the course of several years through partial payments. For instance, if you convert $100,000, you can move $50,000 the first year and $50,000 the second year, or $33,000 each year for three years. You must place each increment in the Roth within 60 days of removing it form the traditional IRA. By partially converting a traditional IRA to a Roth, you can potentially remain within your current tax bracket, which will reduce the tax bite for converting.

Husband and Wife Conversions

You cannot choose, or elect, a period for paying taxes once you convert your IRA -- you must pay taxes as the IRS demands. However, you can control when you pay taxes by deciding when to convert your IRA. Thus a husband and a wife can pay taxes on a Roth conversion in different years simply by converting IRAs at different times. Because IRAs constitute individual accounts, a husband keeps one IRA and a wife keeps another. You and your spouse pay taxes separately on these accounts.

About the Author

Will Gish slipped into itinerancy and writing in 2005. His work can be found on various websites. He is the primary entertainment writer for "College Gentleman" magazine and contributes content to various other music and film websites. Gish has a Bachelor of Arts in art history from University of Massachusetts, Amherst.