I received a distribution less 20% for withholding taxes ($40,000 less $8,000) from my former employer’s 401k on 14Dec2020. I asked my Roth IRA account holder (Morgan Stanley) to transfer the full distribution of $40,000 from my checking account to my Roth IRA. They indicated that they needed to rollover the $40,000 to my Morgan Stanley Standard IRA first and then transfer and convert the full amount to my Morgan Stanley Roth IRA. Both the rollover and the conversion were completed within the 60-day time limit however the conversion from the Standard IRA to the Roth IRA took place in calendar year 2021 on 08Feb2021.
Question:
- Can I complete the 2-step rollover/conversion from 401k to Roth IRA and pay the taxes in tax year 2020 ?
or,
- must I show a rollover from the 401k to Standard IRA in tax year 2020 with no taxes paid and then show a conversion from Standard IRA to Roth IRA in tax year 2021 and pay the taxes in 2021?
My preference is to show the 2-step rollover/conversion all in tax year 2020 and pay the taxes in my 2020 tax return accordingly.
