Roth IRA rollover
Client converted after tax money from their 401(k) to their Roth IRA but mistakenly also converted the earnings instead of rolling to a traditional IRA. Is there any way to fix this if it is client error?
Client converted after tax money from their 401(k) to their Roth IRA but mistakenly also converted the earnings instead of rolling to a traditional IRA. Is there any way to fix this if it is client error?
Permalink Submitted by Alan - IRA critic on Thu, 2025-03-06 16:46
No way to fix it since Roth conversions can no longer be recharacterized. Tax will be owed on the taxable portion of the Roth rollover. May be costly now, but it will save them money in the future in the way of lower RMDs.
I assume that none of the 401k money was in a Roth 401k account.