Roth IRA's are popular deferred compensation plans because they offer tax- free distributions. As a tax preparer or CPA, you will have clients who turn to you for retirement advice. You need to know how to conduct the necessary research to give your clients the best tax advice possible.
In this scenario, your client, John, wants to know if he should rollover his traditional IRA into a Roth IRA. John is 40 years old and has an AGI of $250,000. John currently has a traditional IRA worth $250,000. He expects his income to increase over the next few years and plans to retire at age 65. John has researched Roth IRA's and likes that they offer tax-free distributions. John understands that he may have some tax liability if he rolls over his traditional IRA. He has sufficient funds set aside to pay the tax liability.
What advice would you give John regarding this transaction?