Roth IRAs

As of 1998, some taxpayers can set up an IRA that is backloaded. This means that the contributions are not deductible, but the withdrawals from the account, including all the buildup in value over the years, are tax-free as long as certain conditions are met; namely, that the withdrawals are made five years or more after the account was opened, and after you attain age 59 1/2 or have become disabled.

Joint filers with income under $150,000 can make full contributions of $3,000 apiece to Roth IRAs; for those with income between $150,000 and $160,000, the contribution amount is phased down, until it is phased out completely at $160,000. For singles, the phase-out range is between $95,000 and $110,000, and for marrieds filing separately, the range is between $0 and $10,000.

Since contributions to Roth IRAs are not deductible, they are not reported on Form 1040 or 1040A.

You may be able to convert a "regular" IRA to a Roth IRA, if your adjusted gross income is under $100,000 (single or joint). The catch is that you must pay current income tax on the entire converted amount. If the conversion took place in 1998, the IRS allowed you to spread the tax over four years. The converted amount must remain in the account for five years; if it is withdrawn prematurely a 10 percent penalty will apply and any tax due on the conversion that has not already been paid (for instance, if it was to have been spread forward for four years) will become due in the year of the withdrawal.

If you make a conversion from a traditional IRA to a Roth, you must report the conversion on IRS Form 8606, Nondeductible IRAs. If you converted in 1998 and elected to spread the amount over four years, report this year's taxable amount on Form 1040, line 15b.