Best Laid Plans of Mice and 8606 Roth Converters
So back in October I decide I'm going to convert about $40K out of traditional IRA to a Roth, and elect to split it up into two tax years. This should max out my tax bracket, I figure, without going into the next higher tax bracket*.
So last year I opened the 2009 tax software and plugged in my 2010 estimates, including $20K traditional to Roth conversion (half of what I plan to convert, since I'll be splitting it). It says I owe $2600, so I make an estimated payment to the IRS for that amount.
Today, I load basically the same data into the 2010 tax software, including my estimated payment, and it says I'm getting this huge tax refund! Then I look at the 8606 and I see that if you choose to pay over two tax years, it also advances it out of 2010! (you pay in 2011 and 2012).
Am I the only numskull that thought it would split between 2010 and 2011?
I can re-characterize $20K back, right? (and pay taxes on $20K now)?
* My strategy was to convert just enough to get me up to the very top of the 15% bracket, but not into the next bracket. If I don't convert any this year, I'm "wasting" that 15% space.