Conversion
Client was self employed for most of 2015. We opened a solo 401K to max his contribution for the year. Client also has an IRA worth about $200,000 with an after tax basis of about $15,000 from non deductible contributions. Can we transfer the pre tax portion of the IRA to the solo 401K and leave the after tax portion of the IRA in the IRA and then convert the $15,000 into the client’s Roth IRA? Obviously the goal is to convert without any tax impact.
Thanks in advance and Happy Holidays.
Glenn
Permalink Submitted by Alan - IRA critic on Wed, 2015-12-23 23:48
Yes, this can be done as long as the solo K plan document is written to accept IRA rollovers. Of course, Form 8606 is based on year end values, so if the 185k pre tax TIRA amount has not been rolled out before year end, then the conversion will also have to wait until 2016. If client is positive the IRA rollover can be done before year end, the conversion could be done at the same time or before the IRA rollover to save time.