Rolling over 401k pro rata rule
If someone requests a rollover from a 401k in December but does not deposit the check into the new IRA until January, would that make them subject to the pro rata rule for Roth conversions? The rollover would be reported in 2023, but not deposited until 2024.
Thank you!
SD
Permalink Submitted by Alan - IRA critic on Sun, 2023-12-10 01:37
The direct rollover from the 401k is not treated as an “outstanding rollover” for purposes of inclusion in the IRA year end value, as it would have been if the distribution was from another IRA account. Therefore, in the proposed situation, if the taxpayer receives a direct rollover check from the 401k this month and has done or plans to do a conversion that includes IRA basis, they should hold the check until January 2nd before sending it to the IRA custodian. Note that Form 5498 for the current year will not include the 401k money nor will the year end IRA statement or line 6 of Form 8606..