Wisconsin Adopts Federal Roth IRA Conversion Rules

Tom Magnor, CPA, Tax Specialist   email
April 2010

On January 1, 2010, the highly anticipated change in Roth IRA conversion rules took place. This change allows taxpayers with any level of adjusted gross income (AGI) to convert regular IRAs into Roth IRAs, providing the potential to reduce future tax liabilities and create greater wealth. Wisconsin's tax laws lagged behind other states in complying with these new federal rules, making Roth IRA conversions for Wisconsin residents even more complex, until now. On March 15, 2010, Governor Doyle signed a law that conformed Wisconsin's rules to the federal rules.

The new Wisconsin legislation (2009 Act 161), allows all taxpayers the ability to convert their IRAs into Roth IRAs without incurring Wisconsin penalties. The act also allows taxpayers to postpone paying the conversion tax until they file their 2011 and 2012 Wisconsin individual income tax returns. As with the federal changes, the new Wisconsin law allows taxpayers to elect to accelerate all of the Roth IRA conversion income into 2010, rather than spread it to 2011 and 2012. The changes are retroactive to January 1, 2010 so that any Roth IRA conversions already made in 2010, prior to this new act becoming law, will not be subject to Wisconsin penalties.

The long anticipated Wisconsin adoption of the federal laws concerning Roth IRA conversions will make conversions less complex and may provide state tax savings for Wisconsin residents. As the 2009 tax return filing season winds down, tax planning for 2010 is just beginning, especially as it relates to possible Roth IRA conversion strategies. If you would like more information on Roth IRA conversions, or would like a Roth IRA analysis of your current tax situation, please contact Tom Magnor.

(Please also see the following articles for more information on the new rules for Roth IRAs and the conversion opportunities in 2010:  Changing the Game: A Look at the New Roth IRA Conversion Rules Part 1 and Part 2).