8606 End of Year IRA Value
Hello-
When converting your IRA (that has basis) to a Roth and determining the amount that is taxable, my understanding is it has to be pro-rata between pre-tax and after-tax of all IRAs that you have at year end. If you roll an IRA directly from your custodian to a 401k and it is still in process (in the mail) at the end of the year, is it included on the 8606 or excluded?
I see this line in the 8606 instructions: “Note: Don’t include an outstanding rollover from a tradtional, SEP, or SIMPLE IRA to a qualified retirement plan.” but want to make sure I am understanding correctly. Since it is going direct from one custodian to the other is it even considered an outstanding rollover?
Thank you!
Permalink Submitted by Alan - IRA critic on Sat, 2021-12-04 02:26
Yes, it is an outstanding rollover whether it is being done as a direct rollover or a 60 day rollover. “Outstanding” just means that the amount has been distributed from the IRA, but the rollover contribution has yet to be made as of year end. If the outstanding rollover is to be contributed to another IRA account, the value should be included on line 6 of Form 8606. However, your quoted note is an exception to including the value on line 6 when the outstanding rollover is earmarked to go to a qualified plan. In that case, it is not included on line 6.