• Starting in 2008, several rules limiting eligibility to convert a regular (traditional) IRA to a Roth IRA were rescinded. As of 2010, you may convert an IRA to a Roth IRA even if you are married but filing separately or if you make over $100,000 a year. About the only restriction remaining is that you can convert an inherited IRA only if you are the spouse of the deceased. You still must follow IRS rules to convert an IRA to a Roth IRA or risk incurring hefty tax penalties.
  
  

Existing Roth IRA

• You must have one or more Roth IRA accounts to convert the funds, since the conversion requires you to move the money from the old IRA to a Roth account. If you don't already have a Roth IRA, you can open one with your bank, a mutual fund or a brokerage firm.
  
  

Transfer Funds

• Withdraw the funds you wish to convert from your IRA. You may convert all or just part of the money. However, you must deposit the money in the Roth IRA within 60 days to comply with IRS rules. It's always prudent to consult with a financial adviser or plan administrator to be sure you carry out the transfer of funds properly.
  
  

Tax Consequences

• When you convert IRA funds to a Roth IRA properly, there is no penalty. However, you must declare the transferred funds and pay any regular taxes you would owe if you had simply withdrawn the money. Complete IRS Form 5329 (Additional Taxes on Qualified Accounts) and file with your yearly income tax return.