After Tax Return of Funds to Roth
Just attended the IRA Forum last week in Philly and learned something new that I want to confirm:
Client rolled-over funds direct from his TSP to a Rollover IRA. He had about 11,000 in tax-exempt funds sent to him via check. My understanding, from last weeks event, is that tax-exempt funds (after-tax contributions) can actually be rolled-over into a Roth IRA. Can you please verify that this is in fact the case and that this $11,000 is eligible to be added to his Roth.
Thanks!!
Permalink Submitted by Alan - IRA critic on Fri, 2015-08-07 16:07
Yes, within 60 days of receipt the client can roll the 11,000 of after tax funds to a Roth IRA. This would be non taxable and reported on line 16a of Form 1040. Client will get two 1099R forms from the plan to total up and show on line 16a, 0 on 16b and “rollover” entered next to 16b. Form 8606 does NOT apply. For his Roth IRA, this rollover will be treated as a non taxable Roth conversion for 2015 in the event he takes any non qualified distributions.
Permalink Submitted by Jimmy Rench on Fri, 2015-08-07 16:42
FYI. I spoke with Fidelity Retirement Services yesterday and they said that standard procedure is to now automatically split the distribution from 401(k)s into pre-tax and post tax checks.
Permalink Submitted by Brian Bishop on Mon, 2015-08-10 13:19
Thank you for responding and confirming what I hoped was true!!