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I filed my 2010 taxes in February of 2011. In the first week of April 2011, I opened a Traditional IRA account online with Fidelity and contributed the maximum allowable amount of $5000 for the year 2010. After 2 days and some research and advice I decided that a Roth IRA would be more suitable. So I requested for my $5000 dollar to be re-characterized to a new Roth IRA account which after some delay was finally completed on April 15 2011 (just before the tax deadline).

My question is what precautions do I need to take in terms of reporting to IRS what and when? I'm completely new to this stuff and what I did might seem a bit dumb, but I'm young and have just started out investing for retirement and all this is very new to me since I've been living in the United States for only the past 1 year.

  • Just for the record, the tax deadline for 2011 is April 18 since April 15, 2011 is Emancipation Day. – Stainsor Apr 16 '11 at 2:27
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Actually I think you're good. A contribution to a traditional IRA can be tax deductible for the current tax year. If you had reported your contribution to the Traditional IRA (to get the tax break) on your tax return then you'd have to amend your tax return. But contributions to Roth IRAs are not tax deductible.

I think the only thing you'll want to do is make a record of the $5000 deposit with a note that you are designating it toward the 2010 tax year. Keep that with your 2010 tax records. And keep similar records of future Roth IRA contributions. (In case you ever get audited.)

Does anyone agree or disagree?

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What does your return reflect? In February did you file that you planned to make the IRA deposit? If so, I believe there's nothing to be done. You happened to make your 2010 deposit this month, and you converted to Roth this year.

  • No, there was no mention of my IRA in my return filed in February since I had no IRA account at that time. I "opened" and "contributed" the full allowable amount of $5000 for 2010 within the first two weeks of April after I already filed the taxes for 2010. – Xubin Apr 16 '11 at 1:58
  • Ok. You said the deposit was made for 2010. I'd file an amended return for '10 to get that IRA on record. You can treat it as a non-deducted IRA so you don't impact the tax due for the year. You then treat it as a conversion in 2011. – JoeTaxpayer Apr 16 '11 at 13:24

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