After-tax contributions and earnings reported on 5498
Hello-
If someone moves both the after-tax contributions and earnings on those contributions from a 401k to a Roth IRA, how should that be treated on the 5498 that is issued by the receiving institution. Would both the contributions and earnings be considered a rollover? Would both be considered a conversion? Should they be treated separately?
Thank you!
Permalink Submitted by David Mertz on Tue, 2021-11-30 15:57
Amounts moved from a 401(k) to a Roth IRA are always reported in box 2 as a rollover. Form 5498 makes no distinction between after-tax funds and earnings, that’s reflected instead in the difference between the gross and taxable amounts on the Form 1099-R that reports the distribution from the 401(k). The only amounts to be reported in box 3 of Form 5498 as conversions are amounts moved from a traditional IRA, not from a 401(k).
See the instructions for boxes 2 and 3 in the instructions for Form 5498: https://www.irs.gov/pub/irs-pdf/i1099r.pdf
Permalink Submitted by Alan - IRA critic on Tue, 2021-11-30 15:58
These are reported in Box 2 of the 5498 as “rollover contributions”. The amount includes the total rolled over with no breakdown between 401k contributions and earnings. Also, these are not conversions as a conversion only describes former TIRA funds rolled to a Roth IRA.
The taxpayer must track the taxable/non taxable portions of the rollover for purposes of the 5 year holding requirement for qualified rollover contributions or conversions in the Roth IRA to avoid the 10% penalty. The taxable portion shows in Box 2a of the 1099R reporting the rollover.