From the January 2010 issue of Entrepreneur

Beginning in January, new tax provisions give high-income earners an opportunity to transfer money from a traditional IRA into a Roth IRA.

Although a traditional IRA allows you to deposit money tax-free, to be taxed when you withdraw it at retirement, a Roth IRA works in reverse: Money is taxed on deposit, but you don't pay tax on it, or any of your investment gains, when you withdraw the funds at retirement.

There's been a catch to the Roth, however. If your adjusted gross income topped $100,000, you weren't eligible to make transfers into a Roth. But starting in 2010, there is no income limit for transferring money from an IRA into a Roth. Because an income limit of $176,000 for married couples filing jointly remains in place for direct Roth deposits, transferring the funds to a Roth from another IRA type is the only way to go for high-income earners.

When you transfer money into a Roth, you must pay tax on the deposit, notes Chad Bordeaux, partner in the small-business accounting firm Bordeaux & Bordeaux, CPAs, PA near Charlotte, S.C. This year only, a special provision allows the taxes owed due to the Roth transfer to be spread over two years rather than having to be paid right away.

"The government is trying to allow people to plan instead of having a whopping, huge tax bill in one year," he says. "You can also convert a little each year, as you realize how much tax you can afford to pay."

The stock market downturn also has made Roth conversion attractive, as many accounts have shrunk, lessening the tax burden. Many tax experts anticipate that tax rates will rise in the future to help pay off America's federal deficit, Bordeaux says. If that's true, paying tax now with a Roth may be a better way to go.