Advice for Converting to a Traditional I.R.A. to a Roth I.R.A

People who have an income over a certain dollar amount are not able to open a Roth I.R.A., however, they can convert a traditional I.R.A. to a Roth I.R.A. pursuant to recent changes to the law.  The New York Times offers the following advice for converting:

• If required to take a distribution from your traditional I.R.A in 2010 because of age, take the distribution before converting because otherwise it will be considered an excess contribution, possibly subject to penalties.
• Choose the conversion method that presents the fewest opportunities for messing up, such as opening the Roth I.R.A. with the company that handles your traditional I.R.A.
• Check the box on the Roth conversion form to indicate that you do not want federal taxes withheld.  Otherwise, these withholdings will be taxed and could subject you to a penalty for early withdrawals.
• Select beneficiaries for your Roth I.R.A.  The beneficiary form used for you traditional I.R.A. cannot be used for the Roth I.R.A.
• Verify that the conversion took place properly because you may be prevented from correcting errors after 60 days.

Deborah L. Jacobs, For Shift to Roth I.R.A., Know the Pitfalls to Avoid, NY Times, March 3, 2010.

Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this to my attention.