After tax 401k to Roth IRA ACP test failure
Hypothetical question before I go down this road:
If the 401k fails the ACP test after a conversion of after tax contributions to Roth IRA what are the repercussions for the Roth account?
Thanks in advance.
Permalink Submitted by Alan - IRA critic on Thu, 2018-04-26 18:42
The amount of the excess contribution for which the plan will issue a 1099R was not eligible for rollover and that amount must be treated as an excess regular Roth IRA contribution and removed from the Roth with allocated earnings. The tax return for the year of the 401k direct rollover will only report the allowed amount as a rollover and the other 1099R reporting the excess contribution as a taxable distribution. These transactions go on line 16 of Form 1040, and the corrective distribution from the Roth IRA on line 15. I assume that the Roth IRA received a direct rollover from the 401k plan, and the amounts were not first rolled to a TIRA.