401k trad transfer/rollover to Roth IRA
client had $3500 in Trad 401k .
We transferred the Trad 401k directly into her Roth IRA. (she knows she has taxes to pay next year)
However, transferring a Trad 401k to a Roth IRA is counted as a conversion?
or…
Is it Counted as a contribution?
Thank you.
Douglas
Permalink Submitted by Alan - IRA critic on Wed, 2021-01-27 16:23
Technically, it is called a “qualified rollover contribution” but for Roth IRA basis tracking purposes it should be considered a conversion contribution and as such does not affect the Roth IRA regular contribution limit or count in the MAGI determination for making a regular Roth IRA contribution. It is also not reported on Form 8606 like a conversion would be. The 1099R amount will be reported directly on line 5 of Form 1040, with taxable amount on line 5b.
Permalink Submitted by Douglas Bauerband on Fri, 2021-01-29 20:14
So the client is allowed to contribute the full 6k (under 50) for 2020 and 2021 to her Roth IRA, correct?She is also contributing 6% of her 85k salary to her 401k, is this okay still with the above contributions to her Roth IRA?thank you,Douglas
Permalink Submitted by Alan - IRA critic on Fri, 2021-01-29 22:06
Yes, these contributions are not affected by the rollover to the Roth IRA. She can make the regular Roth IRA contributions as long as her MAGI is not too high for regular Roth contributions in 2020 and 2021.