I think my primary issue here has been that I did not have a clear understanding of the IRA aggregation and pro-rata rules that state you cannot separate the portion that’s already been taxed from the portion that was deducted from taxes. Since there were existing balances in the Rollover IRA that were previously deducted contributions, it impacts the amount I would owe in taxes on the Roth conversion later.
I see that in my case it may have made sense to inquire about rolling over some or all of the Rollover IRA’s balance into a 401(k) so that it would not be considered in pro-rata calculations but it’s too late for that now.
I’m afraid my oversight here will end up costing me about $400 in taxes.
