401k after tax contributions rolled over to IRA; eligible for Roth?
I have a client who rolled over a 401k with after tax contributions to an IRA ten years ago. Are these after tax dollars eligible for Roth conversion? If so, what records and/or forms are involved. We have the original 401k statement showing the after tax dollars that were rolled to the IRA. There have never been any other dollars out from or into this account.
Permalink Submitted by Alan - IRA critic on Wed, 2016-06-01 00:06
Basis in an IRA applies to all accounts if client owns more than one. If there have been no distributions from any of his non Roth IRAs, the next time he would otherwise file an 8606, he needs to report the after tax amount on line 2 of that form. That will avoid double taxation. He cannot just convert the after tax amount by itself unless he is still working and rolls the pre tax balance of all his non Roth IRAs into an accepting employer plan. Otherwise, the pro rate rules of Form 8606 will apply to any Roth conversions or distributions he takes. He was wise to retain that statement and hopefully he also has the 5498 reporting the amount rolled over to the IRA in the year the 401k was distributed. While unlikely, the IRS could inquire about the line 2 basis he will enter on the next 8606.