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Taxing the old 401k >> Roth conversion

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  • Taxing the old 401k >> Roth conversion

    Couple questions for the significant other (not married, she is filing single)...

    She has $35k in old employer retirement plan and is going to move that money to a ROTH IRA this week because this is the last year she is at a low tax bracket.  Is this type of conversion of old 401k money to a Roth reported on the 8606 as a conversion, or done elsewhere? Just need to know where to report the conversion so appropriate taxes are paid on the conversion.

    Also, she will likely be just under the AGI limit to directly contribute her annual $5500 to an established Roth Account.  Will the conversion of this $35k to her Roth count as part of her AGI, and thus push her over the Roth contribution limit?  If so, that would dictate she would need to contribute to a Trad IRA and then convert that $5500 at a later date, right?

    Everything she has is through Fidelity as well.  Does anyone know if she can just convert the money from old employer to her current Roth account and combine all the funds (old annual roth contribution + new rollover of old 401k), or does it require a separate Roth account to convert the money to?


  • #2

    1. The conversion will be reported to you on Form 1099-R. All you have to do is follow the instructions.

    2. Yes, this will count as part of her AGI.

    3. Therefore, yes, she will need to contribute to a TIRA, which will be nondeductible, and then convert to a Roth IRA. She has until 4/17/17 to do this.

    4. She does not need a separate Roth IRA, but you might not want to co-mingle funds just yet. The "traditional" Roth has special properties that the r/o Roth will not have (ex: the ability to take out original contributions tax free).

    Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087


    • #3
      Awesome, good advice, thanks again as always!