Timing of rollovers

Submitted by Mhotchkiss on Thu, 2023-05-04 14:39

General question of timing of reporting for rollovers. Is a rollover considered done at time of distribution from a plan or at time of receipt by receiving plan? In the case of form 8606, line 6 speaks about “an outstanding rollovers”. If someone is rolling over 401k to their IRA, would the “outstanding rollover” be based on the money have left the 401k, or having been received by the IRA?
Considering impact on trying to do a “basis isolation” strategy. -m



Submitted by Alan - IRA critic on Thu, 2023-05-04 15:13

  • An outstanding rollover as defined must be added to the line 6 actual year end IRA values. The 8606 Inst specifially state that rollovers OUT OF an IRA plan to a non IRA plan are not to be included. Neither are rollovers from a qualified plan to an IRA that have not been deposited to the IRA by year end. Therefore, the addition to line 6 of outstanding rollovers is limited to IRA to IRA rollovers that are not in the IRA during the 60 day rollover window or in the longer rollover window of a self certified exception to the 60 day time limit.
  • Similarly, a recharacterized contribution must also be added to line 6. For example, if a Roth IRA contribution made in the prior year is recharacterized as a (usually ND) TIRA contribution after year end, and therefore is treated as a TIRA contribution all along, the amount that transfers to the TIRA in the subsequent year must be added to line 6 as an outstanding recharacterization as it was not included in the actual year end balance.  Conversely, if a TIRA contribution that is included in the actual year end balance is subsequently recharacterized as a Roth contribution, the amount transferred is subtracted from line 6.
  • These adjustments also affect RMDs for those subject to RMDs, by adjustment of the prior year end balance used to calculate the RMD.
  • To your actual question then, if a 60 day rollover distributed from a 401k is not deposited to the IRA until after the end of the year distributed, there is no line 6 adjustment. The actual IRA balance on 12/31 is used. Therefore, the line 6 adjustments are limited to IRA to IRA rollovers or recharacterizations. Amounts moving in or out of a qualified plan are ignored.

Submitted by [email protected] on Thu, 2023-05-04 15:43

Very much appreciate your detailed answer.  Thank you. -m

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