Deadline to Convert IRAs Extended

Taxpayers will have until the end of the year to make changes in their Roth IRA contributions or convert back to a traditional IRA, an extension of 2 1/2 months, the Internal Revenue Service said Thursday.

The deadline for people who made changes in 1998 is being extended from Friday to Dec. 31 because many taxpayers have had difficulty figuring out the rules for the Roth IRA, which was created by Congress in 1997 and became effective last year.

Unlike a traditional individual retirement account, Roth IRA contributions are made on an after-tax basis, but qualified withdrawals are generally tax-free. Taxpayers had until the end of 1998 to switch to a Roth IRA and pay any taxes over four years, but the IRS has allowed more time for people to convert to a Roth IRA--or switch back to a traditional IRA.

The IRS also announced it is sending letters to 20,000 taxpayers who appeared to be ineligible for Roth IRA conversions they reported on 1998 returns, many because they earned more than the $100,000 income limit.