J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

8.21 Converting a Traditional IRA to a Roth IRA

You can convert a traditional IRA to a Roth IRA regardless of your income or filing status. Before 2010, a taxpayer could not make a conversion if his or her modified adjusted gross income (MAGI) for the year of the transfer exceeded $100,000, and married persons filing separately were ineligible, but these restrictions were eliminated for conversions made in 2010 and later years.

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Filing Instruction

Did You Defer Income From a 2010 Conversion?

If you made a conversion to a Roth IRA in 2010 and did not elect on Form 8606 to report all of the income from the conversion (as figured on Form 8606) on your 2010 return, half of the conversion income was reportable on your 2011 return as a taxable IRA distribution and the other other half must be reported as a taxable distribution for 2012.

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A conversion to a Roth IRA is a taxable transfer, unlike a tax-free rollover (8.10) to a traditional IRA. If you converted a traditional IRA to a Roth IRA in 2012, the entire transfer must be reported as 2012 income unless after-tax contributions were made to any of your traditional IRAs (see “How to report a 2012 conversion to a Roth IRA,” below).

If you took advantage of the special two-year deferral rule that applied only to 2010 conversions, you must report the remaining half of the 2010 conversion income ...