However, two tax traps can still trigger the 10% penalty, he said. One of these traps is if some (or all) of the funds withdrawn are used to pay the conversion tax. Since funds used to pay the conversion tax are not actually converted to the Roth, they are subject to the 10% penalty and income tax.
The second trap occurs when funds converted to the Roth are withdrawn within the first five years and the Roth IRA owner is still under age 59 1/2. You can't avoid the 10% penalty by first converting to a Roth IRA and then withdrawing converted Roth funds to pay the tax.
There are more traps awaiting the ignorant. Slott's best advice: In every Roth conversion, make sure you address each and every tax and planning detail-preferably with a professional who knows what he is doing.
Copyright (c) 2010, Dow Jones. For more information about Dow Jones' services for advisors, please click here.