Current Wisconsin Tax Law Treatment of 2010 IRA Conversions
As of this date (October 29, 2009), Wisconsin has not adopted the provisions of federal P.L. 109 222 related to converting a regular IRA to a Roth IRA in 2010. Until Wisconsin adopts P.L. 109 222, taxpayers who make the conversion from a regular IRA to a Roth IRA in 2010 will have different tax treatments for federal and state income tax purposes.
For federal income tax purposes, persons who make the conversion in 2010 may elect to postpone payment of tax on the converted amount until they file their 2011 and 2012 income tax returns. Because Wisconsin has not adopted the provisions of P.L. 109 222, the tax on the converted amount will be due with 2010 Wisconsin income tax returns.
Persons who make the conversion and who have modified adjusted gross income over $100,000 will be subject to certain Wisconsin penalties.
If the person is under age 59 1/2, the person would be subject to an early distribution penalty. The penalty is equal to 3.33% of the amount converted. The person would also be subject to a 2% penalty for an excess contribution to the Roth IRA. This penalty would be applied each year until the excess contribution is withdrawn. Persons age 59 1/2 or over would only be subject to the excess contribution penalty.
The department will publish further guidance on this issue if P.L. 109 222 is adopted in the next legislative session that begins in January 2010.
Last updated October 30, 2009