Conversion of IRA containing non deductible contributions
I have an IRA that contains both deductible and non deductible contributions. I’m trying to figure out if I could partition those funds and in doing so as to leave only the non deductible portion in the IRA. I could easily move the other portion into my 401k as a temporary holding place. As an example for this discussion lets just say the IRA contains 500k and the non deductible contributions through the years total 100k. I do have all of the 8606 tax forms for each year that I have made contributions starting in 1997.
My goal is to leave only non deductible funds intact in the existing IRA and then do a Roth conversion on those if I can do it with no or minimal tax consequence on those non deductible funds.
The question is there a way to segregate those fund in order to accomplish this.
Age 51 and current income prevents direct contributions to a Roth
Permalink Submitted by Alan - IRA critic on Tue, 2014-06-10 19:10
Yes, there is. If your current 401k accepts rollovers from IRAs, not just from rollover IRAs but all IRAs, you can roll the 400k into the 401k and convert the remaining 100k of basis to a Roth IRA tax free. You can do the rollover and the conversion in any order. It is cleaner to do the conversion first for 100k and then roll the entire remaining balance into the 401k before the end of the year. But if there are any problems with the 401k rollover, you would end up having to recharacterize the conversion to eliminate the tax bill.