Cost basis (principal) for Roth IRA rolled over from Roth 401K
Hello,
Thank you for your time in advance.
I have a client under 59 who had rolled over a roth 401k to a roth IRA in 2017 (7 yrs ago).
The amount rolled over was 100K and the balance now is 400K.
We have the from 5498 for 2017 indicating the FMV, which is the same as the end of year balance. I find this confusing as the rollover was done sometime in the middle of the year.
We are trying to determine the tax & penalty free withdrawal amount.
What would be eligible amount? initial contribution or amount rolled over?
Thank you!
Permalink Submitted by Alan - IRA critic on Sat, 2024-06-15 17:43
The 5498 should show the rollover contribution (100k) in Box 2, and the year end value in Box 5, which is immaterial in this situation. Client needs to locate the 1099R for the direct rollover, as the Roth 401k basis will be shown in Box 5. This amount is treated as a regular Roth IRA contribution once in the Roth IRA and can be withdrawn tax and penalty free anytime. It should be entered on line 22 of Form 8606 when the Roth IRA distribution is reported.