Roth conversion AFTER rolling an IRA to a 401k
Step 1) I currently own only one traditonal IRA consisting solely of pretax contributions. I wish to roll the IRA to my existing 401k.
Step 2) After the IRA is rolled into the 401k, I wish to contribute to an IRA with post tax dollars, then imediately convert the IRA to a Roth IRA. I do not want the original IRA to be included in the prorata rule.
Is there a waiting period between steps 1 and 2 in order for the original IRA in step 1 to not be included in the prorata rule?
Permalink Submitted by Alan Spross on Thu, 2010-05-13 19:47
Tom,
There is no waiting period for the non deductible contribution and subsequent conversion. As long as the pre tax dollars you transfer to the 401k are out of your IRA by year end, those values will not be included in the year end value on Form 8606 used to determine the pro rated taxable portion of your conversion.
Since your conversion would be tax free or almost tax free, you would probably want to opt out of the 2 year income deferral and report your conversion fully on your 2010 return.
Permalink Submitted by Thomas Ferry on Thu, 2010-05-13 19:49
Excellent Alan
I’m very pleased.
Thanks