Generally speaking, to get the best result you want to make sure that the balance in traditional IRAs at year-end is zero. (Although that's not intended in this case, some people make the mistake of rolling over to a traditional IRA pre-tax funds from a 401(k) after having done the Roth conversion with basis in nondeductible traditional IRA contributions thinking that the taxable amount of the Roth conversion has already been established, but it's the year end value in traditional IRAs that matters with regard to determining the taxable amount of the conversion.)
The other thing is, when preparing your tax return, to make sure to think of each transaction as a separately reportable transaction:
- Your traditional IRA contribution.
- Your spouse's traditional IRA contribution.
- Your Roth conversion from your traditional IRA.
- Your spouse's conversion from your spouse's traditional IRA.
- (The after-tax contribution to the 401(k) is not reportable on your tax return.)
- Your rollover from after-tax sub-account in the 401(k) to the Roth IRA (or, if it's an In-plan Roth Rollover, to the designated Roth account in the plan).
- Rollover from the old 401(k) to the Roth IRA.
Make sure that each conversion or rollover ends up in the correct account and that the 401(k) administrator knows what kind of account is receiving a rollover, particularly with #7. However, if your plan is to have a zero balance in traditional IRAs at the end of the year anyway, if a rollover from a 401(k) ends up in a traditional IRA by mistake, it can subsequently be converted to Roth, resulting in the same taxable result.
