2010 has been dubbed the year of the Roth Individual Retirement Account (IRA) conversion.  I need to start with a little background on the differences between regular qualified retirement accounts and Roth IRAs.  Regular retirement accounts (401(K)s, IRAs, etc) are funded with pre-tax  dollars.  As a result, distribution from those accounts are taxable.    Roth IRAs are funded with post-tax dollars.  As a result, normal retirement distributions (conditions apply) from Roth IRA accounts are not taxable.  In addition, unlike traditional IRAs there is no minimum distribution requirement (upon reaching age 70 1/2) for Roth IRAs.

Conversion of a qualified retirement account to a Roth IRA results in normal income tax on the conversion but avoids the additional 10% penalty for early distributions.  As a result, your anticipated tax rates for the present and the future can come into play when evaluating the attractiveness of a conversion.

2010 has been called the year of the Roth IRA conversion because of special provisions that exist for 2010.  The special conditions that exist for 2010 are as follows:
   1)  The annual adjusted gross income (AGI) income limitation of $100,000 for Roth IRA conversions has been removed.
   2)  Roth IRA conversions done during 2010 may spread the income recognition of tax years 2011 and 2012.  This could result in lower marginal tax rates and taxes on the conversion.

Typically, a Roth IRA conversion is attractive if an individual would like to reduce their taxes down the road and reduce tax implications for their beneficiaries.  Many financial advisors will tell you that it is beneficial to have retirement money coming from both taxable and non-taxable accounts.  With a Roth IRA conversion, you really need to look at the specifics of your scenario to see if it will be beneficial for you.  If necessary,  an accountant can assist you in analyzing the tax implications and point you in the direction of qualified financial professionals to assist in the process.