Isolating IRA Basis
Client has an IRA of $800k with $100k of basis. Also has a 401(k) plan that accepts rollovers. Can I convert the basis portion to the Roth IRA first, then rollover the pre-tax portion to the 401(k), or do I have to move the pre-tax portion first, then process the conversion? Thanks!
Permalink Submitted by Alan - IRA critic on Thu, 2025-09-18 15:17
This can be done in either order. The risk of doing the conversion first is that if the reverse rollover fails for whatever reason, client’s conversion will be composed of 87,500 taxable income and conversions can no longer be recharacterized to eliminate those taxes.
Some 401k plans do not accept IRA rollovers at all. Others will only accept rollovers from rollover IRAs, not from any IRAs that received regular contributions. Finally, many plans will accept rollovers with a required certification from the client that the rollover does not include any IRA basis.