Rollover IRA with after tax money
client has pre tax dollars and post tax dollars. Client is under age 59 1/2.
1) if the client takes the after tax dollars from the plan rather than rolling this amount over, will there be any taxes or penalties?
2) if there are penalities, how should this be handled?
3) do you co-mingle the dollars or keep them separate?
Permalink Submitted by Alan Spross on Fri, 2010-08-13 18:10
I assume he has separated from service.
1) He can do a direct rollover of the pre tax amount, and have the after tax amount paid to him. There is no tax or penalty on the after tax money. There will be separate 1099R forms.
2) No penalties.
3) Not sure I understand the question. The plan would do a direct rollover of the pre tax and get a separate check for the post tax. Once these after tax funds leave the plan they would never be commingled unless client changed their mind and decided to do a 60 day rollover to an IRA. If he did that, he would file an 8606 to report the added after tax basis in his IRA.