Roth 401k to Roth IRA when unsure of 401k basis
Young client (not yet 59 1/2) has an existing Roth IRA totaling $7,500 that was originally funded back in 2014. She rolled over her Roth 401k assets totaling $70k into the Roth IRA approximately 2 years ago, and now needs a distribution totaling $20k.
We would like to clarify how to assess potential tax/penalty implications if the client is unable to locate her 1099R that would show her the amount contributed to her Roth 401k, since this is not a qualified withdrawal and we cannot be certain how much of the distribution is basis?
Any guidance is appreciated! Thank you!
Permalink Submitted by Alan - IRA critic on Mon, 2023-03-06 23:25
Client needs to secure a copy of the 1099R to determine the amount in Box 5, which adds to Roth IRA regular contribution basis, which is also needed to report a Roth IRA distribution on Form 8606, line 22. An IRS transcript may be needed if the employer cannot provide a copy. If client has their W-2 for the years Roth 401k contributions were made, those annual amounts are stated on those W-2 forms as well, but the 1099R would provide the total basis.
Permalink Submitted by David Mertz on Tue, 2023-03-07 21:40
If the rollover from the Roth 401(k) to the Roth IRA occurred in 2019, 2020 or 2021, the Form 1099-R should be present in client’s Wage & Income transcript available online from the IRS. If the rollover happend before 2019, filing Form 4506-T would be necessary to obtain the corresponding transcript.