IRA Roth and 401k conversions

Submitted by virgil sinclair on Thu, 2016-10-27 16:15

Question. A person had a 401 K that consisted of both pre tax and post tax funds. As an example say 9000 in pretax and 1000 post tax contributions. On separation the total amount was rolled to an IRA and this was done before Roth plans even existed. Now it appears that IRS Notice 2014-54 recognizes the right to take a current 401K and rollover the after tax amounts to a Roth with no tax consequence. The Rule and many articles seem to say this can also be done retroactive for situations where a total rollover may have occurred years ago. What is the procedure to do this and how would one report this to the IRS so as to not cause a normal Roth percentage of the whole to take place with all other IRAS a person may own.



Submitted by Alan - IRA critic on Thu, 2016-10-27 19:49

  • Notice 2014-54 only allows the split rollover treatment for rollovers prior to 9/18/2014 if a single distribution was directed to both a TIRA and a Roth IRA. This does not apply if the entire distribution was made to a TIRA or for any rollovers done in closed tax years. generally years prior to 2013.
  • The only option for this person is to file Form 8606 and report basis in the TIRA going forward so the 1000 of basis in your example is not lost. The 8606 should be filed when the first TIRA Distribution is taken and the additional basis should be added to line 2 of the 8606. Once after tax amounts are rolled into a TIRA, they can only come out pro rata per Form 8606. However, if the person has a current employer plan that will accept rollovers from TIRA accounts, the person could roll the pre tax TIRA balance into the current plan and then convert the remaining TIRA basis to a Roth IRA tax free.

Add new comment

Log in or register to post comments