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IRS Allows Six-Month Extension to Reverse Conversions to Roth IRAs

May 27, 1999|From Associated Press

WASHINGTON — Taxpayers who discovered they are not eligible to convert a traditional IRA to a Roth IRA but missed the April 15 deadline for switching back got a six-month extension Wednesday from the Internal Revenue Service.

Based on research into its own regulations regarding automatic extensions, the IRS determined these taxpayers should have until Oct. 15 to switch the Roth individual retirement account back to a traditional IRA, preserving their full tax advantages for 1998 returns.

The problem came up when some taxpayers had converted to the Roth IRA in calendar 1998, then discovered their adjusted gross income topped the $100,000 limit to make the change or that they were ineligible because they were married but filed separate tax returns.

Under Wednesday's decision, these taxpayers can undo the switch as long as they filed their 1998 tax returns on time and then file an amended return by the normal three-year deadline of April 15, 2002, to reflect the change.

Roth IRAs have proved wildly popular with people saving for retirement because, unlike regular IRAs, contributions are made on an after-tax basis but withdrawals are tax-free.

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