After Tax money moved to a ROTH
I want to move money to a new ROTH from an IRA that has before-tax and after-tax money and earnings.
The after-tax money is about 20% of the IRA.
Both the IRA and ROTH are at the same institution.
I would therefore convert the before-tax money and earnings and pay the taxes due.
Does the after tax money moved into the ROTH do so tax free?
Will an 8606 need be filed as it was for previous year’s RMD to account for the moved after-tax money?
Permalink Submitted by Alan - IRA critic on Mon, 2020-12-28 23:00
The 8606 must be filed to report any conversion, and it calculates the taxable/non taxable amounts for that conversion. Note that if you have more than one non Roth IRA, they are treated as one combined balance. If the 8606 shows a basis of 20% of the total value, then 20% of the conversion will be non taxable. If you still have time to complete the 2020 conversion by 12/31, it might be a good year because there are no RMDs to increase your taxable income, and starting again next year you would have to complete your RMD before converting an additional amount. You do not have to open a new Roth account if you already have one at this institution.