401k in-plan Roth conversion
Hi.
1. I am 65 years old. I just did a 401k in-plan Roth conversion. Do I report this Roth conversion on IRS Form 8606? Unless I overlooked this I’m not seeing anything about 401K money on the form.
2. Is this newly converted money required to stay in the 401k Roth plan a certain amount of time before I can move it to my Roth IRA?
3. Once I move to ROTH IRA from 401k Roth do I then report this move on Form 8606?
4. Once moved to Roth IRA (opened 6 years ago), when can I withdraw this money from Roth IRA without penalty?
Thank you very much
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Permalink Submitted by Alan - IRA critic on Thu, 2022-02-03 16:59
The IRR will be reported to you and the IRS on Form 1099R. This is reported directly on lines 5a and 5b of Form 1040. Form 8606 applies to IRA conversions, which is why employer plans are not referred to in the 8606 Inst. The 1099R from the plan must show the correct taxable amount in Box 2a, as they calculate it, and not the taxpayer.
This is a plan provision if your IRR came from the after tax sub account. The plan may or may not allow you distribute the IRR funds out to your Roth IRA while you are still working there. But if your IRR came from the main pre tax balance from your elective deferrals, the IRR money cannot be rolled out prior to 59.5.
You only use Form 8606 to report distributions from your Roth IRA if they are non qualified. Being 65 and having made your first contribution for a year prior to 2018, your Roth IRA is qualified and you do not need Form 8606 to report Roth IRA distributions. Enter the distribution directly on line 4a of Form 1040.
You can withdraw the entire balance of your Roth IRA anytime you wish and the distribution would be non taxable and penalty free. That includes any funds you roll in from your Roth 401k. You should roll the Roth 401k into your Roth before the year you will reach 72 to avoid RMDs from the Roth 401k. Of course, there are no RMDs on owned Roth IRAs.