401k Rollover with comingled pre-tax and after-tax dollars
Several years ago a new client rolled 100% of their 401k to an IRA. The 401k contained after-tax dollars (about 15% of the account balance). Then a few years later the IRA was converted to a Roth, with the client paying taxes on 100% of the conversion amount. Is there any way for the after-tax dollars to be separated at this point, and for the client to recoup any taxes paid on the after-tax portion converted to the Roth?
Permalink Submitted by Alan - IRA critic on Mon, 2013-10-14 20:55
If the tax year for the conversion is still open, an amended return should be filed for that year. See the following thread with respect to RR 82-49 and particularly the post by Kaye Thomas on how it should apply. Basically, the basis that should have applied to closed years is lost, but there might be some basis left in the TIRA to use on future conversions or distributions or those that occurred for all open tax years and future years. The 8606 needs to be reconstructed from the year of the 401k rollover to see exactly how much basis was lost and how much can still be used. http://fairmark.com/forum/read.php?2,68481