2010 will be a pivotal one for retirement planning, as it will be the first year in which taxpayers will be able to convert funds in regular IRAs (as well as qualified plan funds) to Roth IRAs regardless of their income level. The tax attorneys at McLaughlin & Quinn, LLC are currently advising clients and CPAs on these new rules. This new conversion option poses significant tax planning challenges and opportunities for 2009, 2010 and 2011. The following takes a look at the new conversion option, and explains how to prepare for it.
Conversions to Roth IRAs. For 2009, taxpayers (other than married persons filing separately) with modified adjusted gross income (AGI) of $100,000 or less may convert 
amounts in a traditional IRA to amounts in a Roth IRA. Amounts from a SEP-IRA or a SIMPLE IRA also may be converted to a Roth IRA, but a conversion from a SIMPLE IRA may be made only after the 2-year period beginning on the date on which the taxpayer first participated in any SIMPLE IRA maintained by the taxpayer’s employer.
For purposes of conversions to Roth IRAs, AGI is defined as it is for traditional IRA purposes except that it does not include income resulting from the conversion from a traditional IRA to a Roth IRA. AGI-for purposes of determining conversion eligibility only-does not include any required minimum distribution from an IRA under Code Sec. 408(a)(6) and Code Sec. 408(b)(3).