When you sit down with your tax preparer to discuss your 2011 tax return, be sure to reveal any transaction that might have tax implications, now or in the future. For example:
* Nondeductible contributions to a traditional IRA. These contributions are not tax-deductible. However, they will reduce the tax you owe on future distributions from your traditional IRA and future conversions to a Roth IRA. If you don’t report these contributions on your tax return now, you are likely to find it’s difficult to legitimately avoid tax on future distributions and conversions.
* Distributions from an IRA that has aftertax dollars. Similarly, if you took money from an IRA last year, and that IRA holds some nondeductible contributions, tell your tax preparer so part of that distribution will be reported as tax-free.
* Conversion of a Roth IRA in 2010. A special rule applied to Roth IRA conversions that year. You didn’t have to pay tax on your 2010 return. Instead, you report half the taxable income from the conversion on your 2011 return and report the other half on your 2012 return. Be sure your tax preparer knows about this obligation.
